Theory:
The McGinley dynamic indicator is a versatile tool that can enhance your trading strategy. This version is based on the Metastock formula, but it gives you the flexibility to choose from various "base" average types, with the default being the Exponential Moving Average (EMA). Here are the options you can explore:
- McGinley Dynamic Simple Moving Average (SMA)
- McGinley Dynamic Exponential Moving Average (EMA)
- McGinley Dynamic Smoothed Moving Average (SMMA)
- McGinley Dynamic Linear Weighted Moving Average (LWMA)
Usage:
You can use the McGinley dynamic average just like any other moving average. However, the differences between the types can be quite noticeable (check out the second example where all four types are displayed on the same chart). So, a bit of experimentation is definitely recommended before you start making trading decisions based on it.
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