Mass Index Indicator Explained: Predict Reversals with Volatility"

Explained How to use Mass Index Indicator Mass Index (MI) – Full History & Facts

Mass Index Indicator Explained: Predict Reversals with Volatility"

Created By:

Donald Dorsey, a technical analyst and contributor to Technical Analysis of Stocks & Commodities magazine.

When It Was Created:

Early 1990s

Dorsey introduced the Mass Index as a volatility-based indicator that could predict reversals without identifying direction — a concept that was unique at the time.

Why It Was Created:

Most indicators (like RSI, MACD) try to measure momentum or direction.

Dorsey noticed that many reversals are preceded by volatility expansions, especially when the range between High and Low (not just closing price) grows unusually wide.

He wanted to capture this "bulge" in price range volatility to predict trend reversals — even without knowing which direction the reversal would go.

The Mass Index (MI) is a technical analysis indicator developed by Donald Dorsey. It is primarily used to identify potential trend reversals in the price of a stock or other traded asset. 

Unlike indicators that look at momentum or price direction, the Mass Index focuses on volatility.

What Does the Mass Index Measure?

The Mass Index measures the range between high and low prices over time. It tracks expansion and contraction of trading ranges — a kind of "bulge" in price volatility — which often precedes a reversal in the price trend.

Formula of the Mass Index

High-Low Range = High - Low (for each day)

Apply a 9-day EMA (Exponential Moving Average) to the High-Low Range.

Then apply a second 9-day EMA to the result (EMA of EMA).

Divide the first EMA by the second EMA.

Sum the results over 25 periods.

So, the full Mass Index =

Sum over 25 periods of:

EMA(High - Low, 9) / EMA(EMA(High - Low, 9), 9)

Key Concepts

Threshold Level: A key level is 27.0.

Reversal Signal (Reversal Bulge):

A common strategy is to watch for the Mass Index to rise above 27 and then fall below 26.5.

This pattern is called a "reversal bulge" and signals a potential trend reversal.

However, it doesn't tell the direction of the reversal — just that a significant change may occur.

How to Use Mass Index Indicator

Look for the Mass Index to rise above 27.

Then wait for it to drop below 26.5.

When that happens, it indicates a possible trend reversal is near.

Many traders combine it with moving averages or trend indicators to determine if the trend is up or down.

Example

Imagine you're watching a stock:

The Mass Index rises to 27.4 (above threshold).

Then a few days later, it drops to 26.3.

This is your signal — a reversal may be coming.

You check a 9-day or 18-day moving average — if the trend was up, expect a possible downtrend, and vice versa.

Famous Signal – "Reversal Bulge":

When the Mass Index rises above 27 and then falls below 26.5, a trend reversal is likely.

Dorsey called this the "reversal bulge".

This doesn't tell direction, but when combined with a moving average (e.g., 9-day EMA crossing 18-day EMA), it becomes a powerful signal.

Example Use by Dorsey:

On daily charts, he'd use:

Mass Index (25, 9)

Confirmed by EMA 9 crossing EMA 18

Signal when MI bulge occurs and crossover aligns

Pros - 

Good at signaling trend reversals

Focuses on volatility (not price)

Useful in combination with other tools

cons - 

Doesn’t indicate direction

Can give false signals if used alone

Not useful for short-term trades

Why Mass Index Is Not Great for Scalping:

Lagging Indicator:

Mass Index uses 9-period EMAs and a 25-period sum, making it slow to react on very short timeframes like 1 or 3 minutes.

By the time it gives a signal, the scalping opportunity is often gone.

Volatility-Based, Not Directional:

It only tells you a trend reversal might happen, not which way.

In scalping, you need precise entries and fast direction confirmation, which MI doesn't provide.

Too Smooth for Fast Moves:

In a fast-moving market (like 3-min candles), you want tools that react quickly, not smooth out data.

Final Verdict:

Mass Index = better for swing or trend reversal spotting on 15min+ charts.

Tips to Make Mass Index More Useful:

Use it as a filter, not a standalone signal.

Look for MI bulge (rises above 27 then drops below 26.5).

Combine with:

EMA crossover (like 9/21)

MACD zero line cross

Break of structure or price pattern

Volume confirmation

Timeframe and verdict - 

1 to 3 minute = not good for scalping 

5 min = ok , unreliable 

10 to 30 minute =  decent for reversal spotting 

1 hour plus =  strong for swing , reversal strategies

daily = ideal use case - original design scope 

Mass Index in Modern Use:

Still popular among swing traders, particularly in stocks, forex, and commodities.

Less used by intraday traders due to its lag and lack of directionality.

Can be used to filter false breakouts, anticipate exhaustion, or combine with RSI/MACD for timing.

How to Use Mass Index on TradingView

Step-by-Step Instructions:

Open TradingView: https://tradingview.com

Choose your chart (stock, index, crypto, etc.)

On the top toolbar, click Indicators

Search for: Mass Index

Select: “Mass Index” by TradingView (or another with good ratings)

Quick Summary -