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McClellan Indicator

McClellan Indicator is the indicator of technical analysis characterizing market dispersion (its width) by analyzing the number of growing and declining instruments in the period. One of the most popular indicators of that type.

McClellan Summation Index is formed on the basis of McClellan Oscillator and this index is a separate market technical indicator.

Sherman and Marian McClellan designed an oscillator and Summation Index of McClellan in 1969. In their book “ Patterns for Profit” authors described principles of interpretation of those indicators.

Indicator's components:

  • Growing asset minus declining asset;
  • Calculation of EMA forex with parameters 19 and 39 and daily from (growing asset minus declining asset);
  • Result directly depends on the difference that is measured as follow: from 19-days' EMA we shall deduct 39-days' EMA;


Forex trading strategies

Strategies on the basis of McClellan Oscillator

  • There are different strategies involving this indicator. For example, using it as the sole signal point – zero line. In this case the following should be done:
  • If oscillator crosses zero line from bottom to top, we shall open a long position (or close a short one)
  • If oscillator crosses zero line from top to bottom, we shall open a short position (or close a long one)
  • Also there is an opportunity to apply classic strategies for oscillators, for example:
  • When oscillator exceeds the value minus 70, we make a purchase
  • When oscillator gets below the value +70, we make a sale
  • Besides, this indicator has more complicated recommendations for using signals.

Strategies on the basis of McClellan Summation Index

  • A justified application of trading strategy for McClellan Summation Index is the drawing similar to McClellan Oscillator's building in the part of matching with zero point.
  • If oscillator crosses zero line from bottom to top, we shall open a long position (or close a short one)
  • If oscillator crosses zero line from top to bottom, we shall open a short position (or close a long one)
  • Original methods for this strategy are represented below:
  • Approaching of market to bottom – when market declines -1300
  • It is necessary to wait for formation of top and divergence with market, when index is above +1600
  • If index exceeds +1900 after growth for more than 3600 pips, it says about formation of a significant ascending tendency.

 

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