The McGinley Dynamic indicator is designed to follow prices, avoiding whipsaws that are given when conventional Moving Averages are used.
Conventional Moving Averages have a fixed period and therefore a fixed speed. As a result, price separation occurs when the price moves rapidly which can lead to unwanted results. The McGinley Dynamic however is designed to adjust speed inline with the market.
This tool can be used as a substitute for a conventional Moving Average as a trend confirmation indicator or crossover signal.
There is one input for this indicator:
MD_smoothing – In the same way you choose a period for a Moving Average, choose the period for this indicator. Make this 60% of the period you would otherwise use in a Moving Average. So if your MA period is 20, set this value to 12 for comparative indicator. The default value is 125.
The pictures below show comparisons between the McGinley Dynamic (Red line) and a simple Moving Average (Blue line). The McGinley Dynamic reacts to price increases sooner whilst also tracking closer to prices and reducing whipsaws.
