TSI Indices Technical Analysis & TSI Trade Signals
Index Trend Strength Indicator
Developed by William Blau
TSI is a momentum trading indicator. The TSI is drawn by using a momentum calculation that reacts faster & is more responsive to the price changes, making it a leading indicator that follows price action direction closely in the trading market.
The TSI is drawn as a blue line, the indicator also plots a signal-line which's drawn as a red-line, and these 2 lines are used to generate crossover signals.
TSI also draws a histogram which shows the difference between the TSI Line & the Signal-line. This histo-gram crosses above the or below the centerline, histo-gram levels above the centerline displays a bullish crossover signal, while centerline levels below the center line indicates a bearish crossover signal.
Index Technical Analysis & How to Generate Signals
The TSI uses various different methods to generate trade signals. This indicator can be used in the same way as RSI indicator to determine general trend direction of the markets. Overbought & oversold levels can also be displayed using TSI. The most regular methods of generating trade signals are:
Zero line Crossover ( Histogram crossover not Lines Stock Index crossover)
- Buy - when the histo-gram crosses above 0 a buy gets generated
- Sell - when the histogram crosses below the 0 a sell is generated
Stock Signal line Crossover
- A buy signal gets derived & generated when the TSI line crosses above the Signal Line
- A sell gets generated when TSI line crosses below the Signal Line
This signal is the same as the one above and the timing corresponds with the time when the histo-gram crossovers happen.
Divergence Trading
Divergence setup is used to look for potential trend reversal point of indices. Reversal divergence set-ups are:
Classic Indices Divergence
Stock Index Classic Bullish Divergence: Lower lows in price and higher lows on the trading indicator
Index Classic Bearish Divergence: Higher highs in price and lower highs on the indicator
Divergence trading also can be used in identifying potential trend continuation points in price action direction. The continuation divergence trading setups are:
Hidden Stock Divergence Setup
Stock Index Hidden Bullish Divergence: higher lows in price and lower lows in the indicator
Index Hidden Bearish Divergence: lower highs in price and higher highs on the trading indicator
Over-bought/Oversold Levels on Indicator
This can be used to identify overbought and over-sold conditions in price action movements.
- Over-bought condition - levels being greater than the +25 level
- Oversold condition - levels being lesser than the -25 level
Trades can be generated when TSI crosses these technical levels.
Buy signal - when the indicator levels cross above -25 level a buy signal gets generated.
Sell signal - when the areas cross below +25 level a sell signal is generated.
Over-sold - Buy Trade Signal
Over-bought - Sell Trade Signal
The overbought/oversold levels are indicated using horizontal lines drawn at the +25 and -25 levels.
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