# McGinley Dynamic A Trend reference entry (Moving-average lineage) in the LuxAlgo Library: explained, not implemented as a chart indicator. ## What is the McGinley Dynamic? The McGinley Dynamic is an adaptive smoothing line developed by market technician John R. McGinley in the 1990s to address a standing complaint about moving averages: a fixed length is always tuned for one market speed, so the line lags badly in fast markets and hugs too closely in slow ones. Each bar, the McGinley Dynamic moves toward price by the distance between price and the line, divided by N times the fourth power of the price-to-line ratio. That ratio term is the whole mechanism: when price falls below the line, the divisor shrinks and the line chases price down quickly; when price stretches above, the divisor grows and the line advances more reluctantly. The asymmetry is deliberate. McGinley built the formula around the observation that markets fall faster than they rise, so the line is designed not to get stranded far above a falling market while staying smooth through advances. N is a smoothing factor rather than a literal bar count; McGinley's own guidance was to use roughly 60% of the [EMA](https://www.luxalgo.com/library/concept/ema/) or SMA length you would otherwise choose. It remains a lagging, price-following line: it reduces separation and whipsaw, it does not eliminate them. In symbols, the new value equals the prior value plus (price minus prior value) divided by N times (price divided by prior value) to the fourth power; the fourth power is what makes the adjustment nonlinear rather than proportional. McGinley, a Chartered Market Technician who edited the Market Technicians Association's journal, published the technique through the MTA, and it gained wider circulation as charting platforms added it as a built-in. Strictly speaking it is not a moving average at all: there is no fixed window and no set of weights, just a recursive tracking rule. It belongs to the adaptive family that includes efficiency-driven designs like the [adaptive-lookback MA](https://www.luxalgo.com/library/concept/adaptive-lookback-ma/), though its adjustment engine is the displacement between price and the line rather than a separate market statistic. Filters such as the [Ehlers SuperSmoother](https://www.luxalgo.com/library/concept/ehlers-supersmoother/) attack a different problem, noise removal at a fixed bandwidth, and stop-and-reverse lines like [Supertrend](https://www.luxalgo.com/library/concept/supertrend/) trade smoothness for discrete flips; those tools complement rather than replace it. ## How to read the McGinley Dynamic on a chart It overlays on price like a moving average; the distinctive part is watching how its speed changes with conditions. 1. Add the line with N set to roughly 60% of the moving-average length you would otherwise use, for example N near 12 in place of a 20-period average. 2. Compare it with an [SMA](https://www.luxalgo.com/library/concept/sma/) or EMA of equivalent speed through a sharp selloff: the Dynamic should hug the decline while the fixed averages float above it. 3. Read bias the usual way, from price's side of the line and the line's slope, ideally made objective with an [MA slope filter](https://www.luxalgo.com/library/concept/ma-slope-filter/). 4. Watch separation: because the line self-adjusts, persistent distance between price and the Dynamic marks an unusually fast market rather than a mis-sized setting. 5. Expect chop in ranges: adaptivity reduces whipsaw but does not remove it, so gate signals with a [trend regime label](https://www.luxalgo.com/library/concept/trend-regime-label/) or an equivalent filter. ## How traders use it - As a trend baseline: slope and price's side of the line define bias, the same role an EMA plays, with speed that self-adjusts instead of being fixed by the length setting. - As the smoothing engine inside other constructs: substituting the McGinley Dynamic for conventional averages in crossover systems or MACD-style spreads to cut whipsaw from mis-fit lengths. - As one of several adaptive averages, alongside KAMA and VIDYA, compared when a strategy's fixed-length average keeps being wrong-footed by regime changes. - As [dynamic support and resistance](https://www.luxalgo.com/library/concept/dynamic-s-r-via-ma/): trend-pullback entries at the line, with the caveat that its speed asymmetry keeps it closer to price in declines than in rallies. - As a centerline for bands: building an [MA envelope](https://www.luxalgo.com/library/concept/ma-envelope/) around the Dynamic keeps the channel centered through speed changes that would strand a fixed-length average. ## McGinley Dynamic vs other smoothing lines - **EMA** (https://www.luxalgo.com/library/concept/ema/): An EMA applies one fixed smoothing constant regardless of conditions, so its lag is constant and symmetric. The Dynamic's effective constant changes with the price-to-line ratio, tightening in declines and relaxing in rallies. - **Adaptive-lookback MA** (https://www.luxalgo.com/library/concept/adaptive-lookback-ma/): Adaptive-lookback averages change speed using an external market statistic such as an efficiency ratio or volatility. The McGinley Dynamic adapts using its own tracking error; both attack the same mis-fit problem with different engines. - **Supertrend** (https://www.luxalgo.com/library/concept/supertrend/): Supertrend is an ATR-offset stop line that holds flat and flips discretely, built for signals and trailing stops. The Dynamic is a continuous smoothing line built for tracking. One produces events, the other a path. - **Ehlers SuperSmoother** (https://www.luxalgo.com/library/concept/ehlers-supersmoother/): The SuperSmoother is a digital filter that removes high-frequency noise with minimal lag at a chosen period, but it does not adapt to market speed. The Dynamic adapts to speed but does no principled noise filtering; they solve different halves of the smoothing problem. ## FAQ ### Is the McGinley Dynamic better than an EMA? It solves one specific problem well: staying close to price when a market accelerates downward, because its adjustment factor speeds up as price falls below the line. It is not uniformly better. It still lags, still gets chopped in ranges, and its built-in asymmetry (faster down than up) may not suit every strategy. Compare both on your market before switching. ### What does the N parameter mean in the McGinley Dynamic? N is a smoothing constant, not a literal lookback of N bars. Larger N makes the line slower and smoother; smaller N makes it hug price. McGinley's suggestion was to set N to roughly 60% of the conventional moving-average length you would otherwise use, so an N of 12 stands in for about a 20-period average. ### Is the McGinley Dynamic a moving average? Not in the strict sense. A moving average is a weighted sum over a window; the Dynamic is a recursive tracking formula with no window and a divisor that changes every bar. It occupies the same chart role, so it is grouped with averages, but its math is closer to an adaptive filter. ### Why does the McGinley Dynamic react faster to falling prices? The divisor contains the price-to-line ratio raised to the fourth power. When price drops below the line, that ratio falls below one, the fourth power shrinks it further, and the division makes the adjustment step larger. McGinley built the asymmetry in deliberately, reasoning that markets fall faster than they rise. ### Can the McGinley Dynamic be used in crossover systems? Yes. Two Dynamics with different N values, or a Dynamic against a conventional average, produce [moving average crossovers](https://www.luxalgo.com/library/concept/moving-average-crossovers/) with somewhat fewer stale signals in fast markets. Crossovers still arrive after turns and still chop in ranges; test against the fixed-length version before adopting it. ### What markets suit the McGinley Dynamic best? Its design premise, that declines run faster than advances, describes equity indexes and many single stocks well. Markets without that asymmetry, such as currency pairs, benefit less from the built-in bias, though the general adaptivity still applies. ## Related concepts - SMA: https://www.luxalgo.com/library/concept/sma/ - EMA: https://www.luxalgo.com/library/concept/ema/ - Adaptive-lookback MA: https://www.luxalgo.com/library/concept/adaptive-lookback-ma/ - MA Envelope: https://www.luxalgo.com/library/concept/ma-envelope/ - SWMA: https://www.luxalgo.com/library/concept/swma/ - RMA: https://www.luxalgo.com/library/concept/rma/ - HMA: https://www.luxalgo.com/library/concept/hma/ - KAMA: https://www.luxalgo.com/library/concept/kama/ - JMA: https://www.luxalgo.com/library/concept/jma/ - ZLEMA: https://www.luxalgo.com/library/concept/zlema/ --- Source: https://www.luxalgo.com/library/concept/mcginley-dynamic/ (LuxAlgo Library, the encyclopedia of trading & technical analysis). Free to use with attribution: https://www.luxalgo.com/library/license/