Does anyone have or can code the Mass index indicator for NT?

Developed by Donald Dorsey, the Mass Index uses the high-low range to identify trend reversals based on range expansions. In this sense, the Mass Index is a volatility indicator that does not have a directional bias. Instead, the Mass Index identifies range bulges that can foreshadow a reversal of the current trend.

Single EMA = 9-period exponential moving average (EMA) of the high-low differential

Double EMA = 9-period EMA of the 9-period EMA of the high-low differential

EMA Ratio = Single EMA divided by Double EMA

Mass Index = 25-period sum of the EMA Ratio

With 27 and 26 threshold lines.

The mass index is an oscillator which oscillates around the value 25. Any value below that level stands for low volatility, any level above that level stands for high volatility.

Leaving the mass index as it is makes it difficult to use as an oscillator. It is best to deduct the summation period (default value 25) from the oscillator value. The result is an oscillator that meanders around the zeroline and which is much easier to read.

The original level of 27, which was suggested by Donald Dorsey (see original contribution in Technical Analysis of Stocks and Commodities, V. 10:6, pp. 265-267) translates into a level of 2 for the modified oscillator.

Attached is a first version of the indicator and a chart explaining how to use it.

Thanks Fat Tails

Thank you for sharing this Modified Mass Index. How has this been modified from the classic Mass Index? Can you provide any commentary on the nuances of the indicator? It appears you have highlighted crossovers above zero line indicator pending reversal but what about the same occupying below the zero line. Also is there a significance to the indicator crossing the zero line?

AlphaOptions 

Thank you for sharing this Modified Mass Index. How has this been modified from the classic Mass Index? Can you provide any commentary on the nuances of the indicator? It appears you have highlighted crossovers above zero line indicator pending reversal but what about the same occupying below the zero line. Also is there a significance to the indicator crossing the zero line?

The classic mass index moves around the value 25, which can be considered as average volatility. Any value above 25 shows increased volatility, any value below 25 shows decreased volatility. The reason is that it is built on a sum of ratios. Such ratio would be above 1, if the volatility is higher than average and below 1 if the volatility is lower than average. Donald Dorsey calculated a sum of these ratios for the last 25 bars. The values of the indicator mostly oscillate between 27 (high volatility) and 23 (low volatiliy). Values above 27 are considered extremely high, and may point to a reversal.

However, there is no good reason to use a scale between 23 and 27. If you deduct 25 from these values, average volatility will be represented by the zero line. Any value above 0 represents an above average value of volatility, any value below 0 stands for reduced volatility. The result is a histogram which has the same shape as the original mass index, but has the lower end of the scale cut off.

High volatility stands for fear. Therefore the mass index can essentially be used to detect herding of traders stricken with fear. Interesting enough

-> these are troughs for index futures, as peak volatility is typically low
-> for commodities high volatility can occur at a peak or simply mid-trend

The original version that I have posted in #2 above has a bug that affects the signal line, which is not calculated correctly.

The version attached below has the bug removed.