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Inertia

The Inertia indicator was developed by Donald Dorsey and first appeared in the September '95 issue of Stocks &Commodities magazine. Dorsey chose the name "Inertia" because of his interpretation of a trend. He claimed that a trend is the outward result of inertia; thus it takes more energy for a market to reverse direction than to continue in the same direction. Therefore, a trend is a measurement of market inertia.

In physics, Inertia is defined in terms of mass and direction of motion. Using standard technical analysis, the direction of motion is easily defined. However, mass is not so easily defined. Dorsey claimed that volatility may be the simplest and most accurate measurement of inertia. This theory led him to use the Relative Volatility Index (RVI) as the basis for a trend indicator. Inertia is a RVI smoothed by a linear regression indicator.

Interpretation

www.cmsfx.comThe Inertia indicator is relatively simple to interpret. If the Inertia indicator is above 50, positive inertia is indicated thereby defining the long-term trend as up while the indicator remains above 50. If the Inertia indicator is below 50, negative inertia is indicated thereby defining the long-term trend is down while the indicator remains below 50.

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