McClellan Summation Index
McClellan Summation Index or MSI is a market breadth indicator and is the long-term adjusted version of McClellan Oscillator. It favors intermediate to long-term traders and indicates the strength/weakness of existing trend and predicts trend reversals. McClellan summation index is derived by adding today’s McClellan oscillator value to previous days summation index.
One new method of MSI calculation is also practiced by many; in this, instead of adding today’s McClellan oscillator value, today’s summation value is directly calculated from 10% and 5% trend values. The modified formula is,
The normal range of McClellan summation index range from 2000 to 0; and 1000 is considered as neutral. Movements below zero are considered bearish and above 2000 are considered bullish. Oversold condition is identified when the index reach -1200 (some traders wait for -1500); once -1000 is reached, prices are said to be at market bottom and there is a strong change of market reversal as in the form of a new bullish trend. The historical extremes of MIS are close to 4000 and -2000.
McClellan summation index is better suited to trade broad markets and major trends on a long-term basis as a major trend last about 2 years. The indicator offer better results with used with other long-term indicators and patterns.
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MSI (today) = MSI (yesterday) + McClellan Oscillator (today)
One new method of MSI calculation is also practiced by many; in this, instead of adding today’s McClellan oscillator value, today’s summation value is directly calculated from 10% and 5% trend values. The modified formula is,
MSI (today) = 1000 – (9 x 10% trend) + (19 x 5% trend)
The normal range of McClellan summation index range from 2000 to 0; and 1000 is considered as neutral. Movements below zero are considered bearish and above 2000 are considered bullish. Oversold condition is identified when the index reach -1200 (some traders wait for -1500); once -1000 is reached, prices are said to be at market bottom and there is a strong change of market reversal as in the form of a new bullish trend. The historical extremes of MIS are close to 4000 and -2000.
McClellan summation index is better suited to trade broad markets and major trends on a long-term basis as a major trend last about 2 years. The indicator offer better results with used with other long-term indicators and patterns.
NobleTrading.com Offers Online Stock Trading, Online Options Trading
Online Futures Trading, Online Forex Trading
Worldwide Brokerage Service, Day Trading Brokerage
posted by NobleTrading at
8:46 AM
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