MARKET_MOVERS_INDEX (Market Movers Index)

MARKET_MOVERS_INDEX (Market Movers Index) is a volume oscillator. It was developed by FXCM for technical analysis in forex trading.

MARKET_MOVERS_INDEX allows to monitor the volume size of every transaction. This helps to see whether the market is driven by large or small volume trades.

To calculate its values, the oscillator divides a period's total trade volume by the number of transactions performed during the period. The values are calculated automatically for every period (the calculation formula is provided later in the article). On a chart, MARKET_MOVERS_INDEX is drawn in the form of a line moving up and down above the zero line. The MARKET_MOVERS_INDEX line rises when the trade volume increases and tends to the zero line when the volume is small. Sometimes the line forms a spike indicating a sharp rise of the volume.

As all oscillators, MARKET_MOVERS_INDEX is always drawn in an additional area below the market price chart.

On the following picture, you can see an example of MARKET_MOVERS_INDEX drawn in an additional area below the market price chart.



Please notice that MARKET_MOVERS_INDEX uses the volume data that belongs to the past and does not predict the market price future behavior. A trader can only suppose that the past tendencies will continue to develop in the same way for some time in the future and try to use this supposition appropriately.

The oscillator is not used as a stand-alone oscillator. It works best in conjunction with a market price chart and some other indicators as a confirmation or denial tool of their trading signals.

To apply a MARKET_MOVERS_INDEX oscillator to a chart, a trader needs to follow the procedure common to all Marketscope indicators. For more information, see the Add Indicator article.

During the procedure, a trader can customize the oscillator by specifying its parameters in the Properties dialog box. For more information, see the Change Indicator Properties article.

Please note that the oscillator lacks the Calculation parameters. Therefore, the Parameters tab of the Market Movers Index Properties dialog box contains only Style and Appearance headings.

When a MARKET_MOVERS_INDEX oscillator is drawn on a chart, a trader can analyze its information and try to use it correctly. The oscillator produces no direct trading signals, but its line's behavior can confirm other indicators' information:

• Trend Confirmation
  
  In the majority of cases, the MARKET_MOVERS_INDEX line's direction can be used to confirm a price trend presence and direction. When the line moves step-for-step with an instrument's price, it confirms the direction and strength of the instrument's price trend.
  
  On the following picture, you can see examples of the oscillator's confirming different price trends.
  
  
  
  
• Trend Reversal Confirmation
  
  To confirm an instrument's price trend reversal, look for a divergence. Divergences occur when the market price and the oscillator line move in the opposite directions (divergence itself) or towards each other (often called convergence). Please remember that assessment of whether a period's volume is positive, negative, or neutral is based on closing prices, therefore closing prices should be considered when looking for divergences.
  
  Divergences are subdivided into the following two types:
  
  

• Bullish divergence occurs when an instrument's price moves down, but the OBV line moves up or flat. This indicates that though the instrument's price declines, the growing volume pushes it up, and the price trend will sooner or later reverse and start to rise.
  
  On the following picture, you can see an example of a bullish divergence.
  
  
  
  
• Bearish divergence occurs when an instrument's price moves up, but the OBV line moves down or flat. This indicates that though the instrument's price rises, it has not enough volume to sustain the growth, and the price trend will sooner or later reverse and start to decline.
  
  On the following picture, you can see an example of a bearish divergence.
  
  
  
  Please note that divergences are often misleading in a strong price trend: a bullish (or bearish) divergence can occur in a strong downtrend (or uptrend) and yet the strong downtrend (or uptrend) continues.

The MARKET_MOVERS_INDEX oscillator's values are calculated automatically using the following formulas:

If the current period's closing price is greater than that of the immediately preceding one (positive volume):

OBV_(i) = OBV_(i-1) + TV_(i)

If the current period's closing price is less than that of the immediately preceding one (negative volume):

OBV_(i) = OBV_(i-1) - TV_(i)

If the current period's closing price is equal to that of the immediately preceding one (neutral volume):

OBV_(i) = OBV_(i-1)

where:
OBV_(i) - is the OBV value of the current period.
OBV_(i-1) - is the OBV value of the period immediately preceding the one being calculated.
TV_(i) - is the tick volume of the current period.