McGinley Dynamic

Definition

The McGinley Dynamic adjusts for market speed shifts, which sets it apart from other moving averages, in addition to providing clear moving average lines. The McGinley Dynamic is a technical indicator based on a moving average that was initially designed to track market trends. 

History

John R. McGinley created the McGinley Dynamic to produce a moving average that could drastically reduce the lag between an indicator and the market in general. If successful, the moving average would better be faster and more reliable than other moving averages available.

Calculations

Anyone using the McGinley Dynamic indicator can easily customize it by selecting the number of periods (N) to work with. The calculations for the indicators are as follows.

where:

MD[1] = MD value of preceding period

Price = Security's current price

N = number of periods

It is important to note that the indicator utilizes Price in its formula to better reflect price action within the market and to minimize price separations and volatility. The formula depicted above allows for the indicator to closely monitor price movement of a security.

Takeaways

The McGinley Dynamic was designed to better track the market than its comparable moving average indicators. It stands out from the rest because of its ability to adjust for shifts in market speeds. This is done by using the indicator’s automatic adjustment that has been built into its formula. With it, the McGinley Dynamic can watch for high speeds or slowing speeds, which help identify the trends of a market.

In addition to its adjustments, the indicator is also able to minimize price separations and volatile movements in order to portray pricing more accurately and with as much relevant data as possible.

What to look for

Be mindful of lag when using the moving averages, as no moving average is exempt from the effects of being set in fixed time lengths. The McGinley Dynamic indicator, on the other hand, has already considered this issue, and uses its adjustment of market speed shifts to project smoother and more accurate lines.

Market speed often fluctuates, moving slower or faster at times. The McGinley Dynamic indicator acknowledges this market trait and incorporates an automatic smoothing factor into its formula in order to accommodate market speeds.

Summary

The McGinley Dynamic is an indicator that tracks the market better than comparable moving averages. Its formula allows it to adjust for market speed shifts and price separations, setting it apart from other moving averages and allowing it to present clear, responsive data and more comprehensive moving average lines.