The Market Meanness Index is an indicator for measuring the trendiness of a time series, it uses a very simple formula to calculate a percentage value based on the likelihood of data to go toward its median value.
The lower the MMI value the more trendy will be the data, it doesn’t tell you anything about the direction but it helps you to know you are in a trending condition or not?
When a market is trending it is easier for us to trade and when it is in a random walk our systems fail and we lose, so MMI can help us to find the best possible condition for our momentum a.k.a trend following systems.
MMI is mostly used in trading algorithms as a filter for detecting trending and random walk regimes and if you are a manual trader you can use it the same way too, just look at it if it is falling then it’s good time to trade and if it is raising then stop trading.
I strongly recommend you to read this article about MMI:
- One of the best possible ways to use for determining the market regime
- Works on all timeframes and markets
- Easy to calculate and useful for both manual and algo traders
- Proven to increase the profitability of trend following systems