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One of the major problems of moving averages such as the simple moving average is its lack of quick response to price. The higher the lookback period of the moving average, the slower the response to price movements. Other moving averages, such as the exponential moving average (more weight is given to the latest data), have tried to improve the responsiveness to market movement, but for many traders this is not enough.
McGinley Dynamic indicator tries to address this issue; it was designed to be more responsive to the underlying security changes.
Instead of a lookback period such as the ones you can find in moving averages, McGinley Dynamic indicator replaces it by a constant number that defines how closely the indicator tracks the stock or security. McGinley Dynamic adjusts itself depending on the speed and volatility of the market and it can be used in both fast/slow markets and long/short trading systems or strategies.
The function behind this indicator is called: "McGinleyDynamic":
Series: The time-series used to calculate the trading indicator. Example: close
Number: A constant value that specifies how closely the indicator tracks the index
Example:
a = McGinleyDynamic(close, 10);
Plot(a, "McGinley Dynamic Technical Indicator");
To simulate a 50-day moving average, you should set N to 60% of the moving average period (60% of 50 = 30).
McGinley Dynamic indicator was invented by a market technician, John R.McGinley, in 1990.
Trading financial instruments, including foreign exchange on margin, carries a high level of risk and is not suitable for all investors. The high degree of leverage can work against you as well as for you. Before deciding to invest in financial instruments or foreign exchange you should carefully consider your investment objectives, level of experience, and risk appetite. The possibility exists that you could sustain a loss of some or all of your initial investment and therefore you should not invest money that you cannot afford to lose. You should be aware of all the risks associated with trading and seek advice from an independent financial advisor if you have any doubts.
