The Mass Index calculates various values, even the exponential averages of the ranges, using a number of bars. After that it works out the indexes and traces the results. Mass Index shows the direction in trending markets and forecasts possible direction changes of forex market.
The Mass Index line rising over the setup line and getting lower than the trigger line afterwards indicates a possibility of price reversing, which is called “a reversal bulge”. It’s impossible to find out the direction of the trend through the Mass Index but it shows potential reversals successfully.
Calculation:
MI = SUM (EMA (HIGH – LOW, 9) / EMA (EMA (HIGH – LOW, 9), 9), N)
Where:
SUM — means a sum;
HIGH — the maximum price of the current bar;
LOW — the minimum price of the current bar;
EMA — the exponential moving average;
N — the period of the indicator (the number of values added).
