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1992issue C061-6

Constructing the mass-index range-reversal procedure

The mass-index is assembled as a double-smoothed daily-range sum, confirmed with two fixed levels, paired with an inverted two-speed close average for side, and placed only with a stop-loss already specified.

  • Build the mass-index as a 25-period sum of the ratio of a once-smoothed daily-range to a second smoothing of that same series.
  • Treat a reversal-bulge as confirmed only when the sum reaches 27 or higher and then declines back through 26.5.
  • After that confirmation, take the opposite of the dual close-average direction rather than following the prevailing slope.
  • Specify a stop-loss as part of placing the new position so a failed reversal remains bounded.
Entries in this reading3 entries
Current trackMean reversion43 readingsStop-loss order144 readingsMoving average449 readings

Build the mass-index from daily-range

The mass-index is built as a 25-period sum of the ratio of a once-smoothed daily-range to a second smoothing of that same series. Daily-range is the high minus the low of a bar and is the raw width input.

That construction marks whether ranges are widening or narrowing. Range-oscillation is treated as a measurable state, not as a visible chart shape.

Apply exponential-smoothing twice

Exponential-smoothing is a recursive update that blends a large weight on the prior smoothed value with a smaller weight on the newest observation. Each smooth uses a 0.8 weight on the prior value and a 0.2 weight on the newest input.

The same update is applied first to daily-range and then again to that smoothed range. A moving-average is an exponentially smoothed series of range or closing prices, including a fast close average and a slower second smooth used only to label recent direction.

Confirm a reversal-bulge with two levels

A 25-period sum above 25 is treated as a widening-range state, and a sum below 25 is treated as a narrowing-range state.

A reversal-bulge is a gradual but definite increase in average daily-range near a turning point. Confirmation is defined as the mass-index reaching 27 or higher and then declining back through 26.5.

Invert the two-speed close average

Direction is labeled with a fast exponential average of closes and a slower second smooth of that average. The fast series above the slow series is read as a recent up direction.

After the mass-index falls back through 26.5, the procedure applies mean-reversion. It takes the opposite of the dual-average direction rather than following the prevailing slope.

Width can warn while closes still extend

The width construction can warn of a turn while new closing highs or lows are still printing. Close-based indicators may still read that same condition as continued strength.

Require a stop-loss before the position exists

Once the width confirmation fires, a stop-loss is specified as part of placing the new position so a failed reversal remains bounded.

Educational research material, not investment advice. Historical source context does not establish present-day performance.
2 of 36 in the Mean reversion track
19931-4 pp.Next on Mean reversionSwitch trend following and mean reversion with an equity-curve filterKeep the trend-following book and the mean-reversion book intact as complete entry-exit procedures.
All readings on this track · 36 readings
  1. 1986A futures fade as one range, order, and secrecy procedure
  2. 1992Constructing the mass-index range-reversal procedure
  3. 1993Switch trend following and mean reversion with an equity-curve filter
  4. 1994Evaluating weekly trend-following and mean-reversion timing rules
  5. 1996Dual-horizon bands for a precious-metals cash switch
  6. 1997Constructing a moving regression oscillator
  7. 1997Regime-dependent long and short rules in mechanical systems
  8. 2002A same-session pair book with a morning-fixed volatility envelope
  9. 2004Combining noncorrelated trend and reversion systems
  10. 2004Failed-breakout overlays on trending markets
  11. 2004Rank rotation after a path split, then Robustness testing
  12. 2004Range-bound tape as a filter for trend and oscillator rules
  13. 2005A moving-average short pullback that is only in scope in a decline
  14. 2006Constructing an adaptive price zone from a double-smoothed range
  15. 2007Two-period relative strength index versus a one-week universe baseline
  16. 2008Building ETF mean-reversion entries with a two-bar washout
  17. 2008Rebuild a short-period stochastic as a premier stochastic oscillator
  18. 2008A three-market regime map for equity bounces and dollar cycles
  19. 2009Option trade adjustment as one testable procedure
  20. 2010Implied volatility as a May 2010 market-regime lab for the S&P 500
  21. 2011Treat a large one-day move as a classified event
  22. 2011Long-call exits, volatility regimes, and spread assignment
  23. 2011Pairing same-horizon oscillators with a walk filter
  24. 2012Two-bar band extreme entries with trailing stops
  25. 2012An eight-month average as a monthly gate for high-yield bonds
  26. 2014Complete the checklist before the trade
  27. 2014Coded rules should face one test, not a kinder sample
  28. 2015Build a mean-reversion basket from one correlation path
  29. 2015Index dip reversion is horizon and regime dependent
  30. 2016Treat the end of a trend as a handoff, not a broken system
  31. 2017A testable half-swing pullback for trend continuation
  32. 2017Evaluating four swing detection rules for mean reversion
  33. 2018Intraday breakout and mean reversion as one rule set
  34. 2018Evaluating rare consecutive-close mean-reversion entries
  35. 2020Moving-average baselines, price vetoes, and mean reversion
  36. 2020Two-dimensional FX scaling for trend and reversal systems
By fieldIndicators and filters682 readingsBy year1992115 readings
All 43 readings tagged Mean reversion
Also on Mean reversion5 readings
2015Index dip reversion is horizon and regime dependent1994Evaluating weekly trend-following and mean-reversion timing rules1996Dual-horizon bands for a precious-metals cash switch2005A moving-average short pullback that is only in scope in a decline2008Building ETF mean-reversion entries with a two-bar washout