The Reason Behind This Guide:
When diving into the world of indicators, many descriptions can sound overly technical and leave us scratching our heads. For instance:
The McGinley Dynamic indicator is a unique type of moving average designed to better track market movements compared to traditional moving averages. It enhances the standard moving average by adjusting for fluctuations in market speed...
This leads us to wonder: what really makes this indicator so special? There's often confusion surrounding its calculation, and it seems that most versions available for MetaTrader are based on an incorrect formula. In this post, we'll explore both the original and an improved version of this indicator.
The original formula, while impressive in its intentions, is a bit slower than the typical moving averages we often compare it to, like EMA or SMA. Some might argue that this lag is meant to help it follow trends more effectively, but we’ll leave that debate for another day. What’s crucial to note is that an improved formula has emerged, designed to bring the indicator's values more in line with those of the EMA. This version allows for calculations using both the original and the improved formulas.
Here’s a comparison of the original formula against the EMA and SMA (depicted by the gray lines).
And here’s how the improved formula stacks up against those same EMA and SMA.
How to Use It:
Apply it just like any other average indicator on your price charts.
Important Note:
Be cautious: the original formula has a critical downside. If there are any zero values in the data series you’re working with, the indicator will fail to provide meaningful results. It’s best used on datasets that consistently avoid zero values.
Comments 0