Mass Index Indicator is developed by Donald Dorsey. It uses the difference between the high and low in a given interval to spot potential price reversals. The Mass Index is a volatility indicator that does not have a directional bias. Instead, this indicator identifies range bulges that can foreshadow a reversal of the current trend. Let us check how to attach this indicator in Zerodha Kite platform and also what are the usage of this technical indicator.
You will get this indicator in the STUDIES section in the Kite web platform. Check the default parameters of the indicator as shown in the image above where we attached the indicator on HDFC share price intraday chart. The default parameters are Period: 25 and Bulge Threshold: 27.
The single exponential moving average (EMA) provides the average for the high-low range and the double exponential moving average (EMA) provides a second smoothing of this volatility measure. To determine the Mass Index indicator value, first, calculate the nine-day exponential moving average (EMA) of the range between the high and low prices for a period of time – typically 25 days (Period). A “buy” signal is generated when a reversal signal appears and the EMA crosses lower and “sell” signals are generated when a reversal signal is combined with an upward EMA cross.
- Mass Index rises above the trigger line which is set at 26.5 and the setup line which is set at 27.
- When the Mass Index falls below the trigger line, then a reversal of the prior trend is expected then falls below the setup line.
The Mass Index indicator uses the high-low differential to provide a smoothed volatility measure. This indicator typically fluctuates in the mid-20s. In the high end of the historical range suggest increasing volatility, which increases the chances for a trend reversal. In this indicator, chartists should consider a lower threshold to produce more signals. The Mass Index does not have a directional bias. The directional bias depends on the existing trend. As with all indicators, chartists should use other analysis techniques to complement the Mass Index.