What it is
The Mass Index was developed by Donald Dorsey in the early 1990s. It looks only at the high to low range of candles. When ranges expand quickly and then contract, trends often change direction.
It sits in its own pane and usually hovers in the mid 20s. The signal everyone watches is the bulge: a rise above 27 followed by a drop below 26.5.
How it is calculated
1. For each candle, take the high minus the low. 2. Smooth that with a 9 period exponential moving average. 3. Smooth the result again with another 9 period exponential moving average. 4. Divide the first average by the second. When ranges are expanding, this ratio rises above 1. 5. Add up that ratio over the last 25 candles. The total is the Mass Index.
Settings
| Setting | Default | Range | What it changes |
|---|---|---|---|
| sum length | 25 | 5 to 100 | How many candles of the ratio are added up. Shorter makes bulges come and go faster. |
How to read it
How to trade it
- 1
Note the trend before the bulge, using a 9 period moving average or swing structure.
- 2
Entry trigger: once the Mass Index falls back under 26.5 after topping 27, take a trade against the prior trend on the next close through the 9 period average. On gold 4 hour after a rally, sell that close.
- 3
Stop: beyond the extreme of the move, for example 15 to 25 points above the gold high.
- 4
Target: the start of the last leg, or 2 times the stop.
- 5
If price keeps making new extremes in the old direction, stand aside.
The reversal idea is cancelled if price closes beyond the extreme of the move that came before the bulge.
WickSpeak draws it on the chart and writes a plain-English reading on the live candle: what it is, what it is doing now, how to trade it and what would prove it wrong. Playbook can test it as a condition in a play: is above or below a number, crosses above or below a number, is above or below its own average, is rising and is falling. A two step play can test "crosses above 27" followed by "crosses below 26.5".
Best markets and timeframes
Works best on 1 hour to daily charts where trends last long enough to reverse. On gold and US30 the 4 hour and daily charts give the clearest bulges.
Common mistakes
- Treating the bulge as a direction signal. It only warns of a turn.
- Entering when it crosses 27 rather than waiting for the drop below 26.5.
- Using it on very short timeframes where the bulge triggers on every news spike.
Works well with
Questions traders ask
What is the reversal bulge?
It is the Mass Index rising above 27 and then falling back below 26.5. Dorsey described it as a warning that the current trend may soon reverse.
What are the standard Mass Index settings?
The standard is a 9 period exponential average and a 25 period sum. Most traders keep both.
Does the Mass Index tell you direction?
No. It only measures range expansion and contraction. Use the direction of the trend before the bulge, and trade against it.
How often does a reversal bulge happen?
It is fairly rare on higher timeframes, which is part of its appeal. On short timeframes it appears much more often and is less reliable.