Mass index reversal

Donald Dorsey's mass index looks for a 'bulge' in the range between high and low, smoothed twice, as a warning that a trend may be about to reverse. It is a volatility-of-range tool. It does not pick the direction. Direction still has to come from price, often a trendline or a moving average break after the bulge.

Not investment advice. Nothing here is a recommendation to buy or sell anything. Backtests and historical studies are not guarantees, and a rule that worked in one sample can fail in the next. Trading can lose money. Links are for education, not endorsements. Do your own research.

Rules

Form a ratio of a 9-period EMA of the high-low range to a 9-period EMA of that EMA. Sum the ratio over 25 periods. The classic bulge is a rise above 27 followed by a fall back through 26.5. After that event, take the next price reversal signal, such as a break of a short moving average, and skip the bulge if price never confirms. There is no trade on the bulge alone.

Where AI fits

AI can detect the 27/26.5 bulge exactly and then require a separate, prewritten price trigger so the reversal is not chosen by eye. It can count how often bulges pass with no reversal. Changing 27 after the fact is fitting.

Markets

Stocks and futures with meaningful high-low ranges. Quiet FX crosses may never bulge.

Timeframes

Daily.

Risks

The bulge is uncommon, so results hinge on a few events. It does not say up or down. A range expansion can be the start of a trend, which is the opposite of a reversal. The 27 and 26.5 levels are conventions from the original write-up.

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