McGinley Dynamic

McGinley Dynamic indicator was created by John McGinley .

McGinley Dynamic indicator is a trend following indicator.

McGinley Dynamic indicator was created with the main aim of solving the inherent problem of all moving average since it is a smooth mechanism indicator for prices .Therefore it is able to follow the market closely than any other moving average indicator.

Just like in all moving average indicator, McGinley Dynamic indicator is also used to indicate the direction of the market.

McGinley Dynamic indicator is therefore based on bullish and bearish as well as support and resistance.

McGinley Dynamic is therefore calculated using the following formula;

MD= MD-1+(Price-MD-1)/(n*(price/MD-1)^4

Where as;

MD is the curent McGinley Dynamic value;

MD-1  is the previous McGinley Dynamic Value;

price is the price of the asset/security.

While n is the smoothing moving average.

 Since McGinley Dynamic indicator is a trend following indicator and is based on bullish and bearish market, it therefore follows that when the price is in an upward trend the McGinley Dynamic indicator will also be moving upwards.On the other hand, if the price is in a downward trend,the McGinley Dynamic indicator will also be moving downwards.
Based on support and resistance, When the price rises above the McGinley Dynamic indicator when the movement is in an upward trend, the market and the McGinley Dynamic will reverse and start moving downwards thus signaling the trader to close any buy position and enter a sell position.
On the other hand, When the price falls below the McGinley Dynamic indicator when the movement is in a downward trend, the market and the McGinley indicator will reverse and start moving upwards thus signaling the trader to close any sell position and open a buy position. This is indicated as from the candle sticks chart below;



From the candle sticks chart above, there are 3 points, Point A,B and C. Point A and B represent the support and resistance point while point C which is a blue curve represent the McGinley Dynamic indicator. 
At point A, the market and the McGinley were initially in a downward movement.The price then falls below the McGinley Dynamic thus resulting to an upward reversal direction for both the market and the  McGinley Dynamic as indicated by the upward arrow.This will singal the trader to close any sell position and open a buy position.
On the other hand, at point B, the market and the McGinley were initially in an upward trend movement.The price then rises above the McGinley Dnamic thus resulting to a downward reversal direction for both the maket and the McGinley Dynamic as indicated by the downward arrow.This will signal the trader to close any buy position and open a sell position.


Recommendation:If you are a day trader just use 1 min,5 min, 15 min and 30 min timeframe while if you are a swing trader just use 1 hour and above timeframe if you want McGinley Dynamic indicator to work well for you





Comments

Post a Comment

Popular posts from this blog

MA cross

Image
MA cross is a trading indicator that is used to filter out noise from the price chart. MA cross can also be used by a trader to know the direction in which the price is moving. MA cross indicator is a trend indicator. MA cross is based on the crossover. Based on the crossover, MA cross has two moving average, the shorter term moving average and the longer term moving average. The shorter-term moving average is normally red in color and it represents the price while the longer term moving average is normally blue in color and it represents the moving average. Therefore, since MA cross is based on the crossover, it, therefore, follows that when the short term moving average crosses above the long-term moving average that will be an indication of an upward market movement thus the trader should be trading upwards. On the other hand, when the short term moving average crosses below the long-term moving average that will be an indication of a downward market thus the trader should b
Read more

Least Square Moving Average(LSMA)

Image
Least square moving average is also called linear regression moving average. Least square moving average is a trend following indicator. Just like in other moving average indicators, least square moving average is also used to indicate the direction of the market, that is whether the market is trending upwards or downwards. Least square moving average is based on bullish and bearish market as well as support and resistance. Least square moving average is therefore calculated using the following formula; LSMA= h*t+b  where as h={(n Σt i x i ) -  ( Σt i Σx i )}/{(n Σt i ) - ( Σt i Σt i )} b=1/n Σx i -h*1/n Σt i while t is the time and n is the period Since least square moving average is a trend following indicator and is based on bullish and bearish, it therefore follows that when the market is in an uptrend movement,the least square moving average will also be moving upwards while when the market is in a downward trend, the least square moving average will also be
Read more