McGinley Dynamic

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 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, though its adjustment engine is the displacement between price and the line rather than a separate market statistic. Filters such as the Ehlers SuperSmoother attack a different problem, noise removal at a fixed bandwidth, and stop-and-reverse lines like 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. 1Add 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. 2Compare it with an SMA or EMA of equivalent speed through a sharp selloff: the Dynamic should hug the decline while the fixed averages float above it.
3. 3Read bias the usual way, from price's side of the line and the line's slope, ideally made objective with an MA slope filter.
4. 4Watch 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. 5Expect chop in ranges: adaptivity reduces whipsaw but does not remove it, so gate signals with a 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: 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 around the Dynamic keeps the channel centered through speed changes that would strand a fixed-length average.

McGinley Dynamic vs other smoothing lines