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 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 cross-over 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 center-line 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 to determine general trend direction of the markets. Overbought & oversold levels can also be displayed using TSI. The most regular methods of generating 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 patterns 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 also can be used in identifying potential trend continuation points in price action direction. The continuation divergence trading setups are:

Hidden Stock Divergence Trading 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 indicator

Over-bought/Oversold Levels in Indicator

This can be used to identify overbought and oversold 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.

Oversold - Buy Signal

Over-bought - Sell Trade Signal

The over-bought/over-sold levels are indicated using horizontal lines drawn at the +25 & -25 levels.

Study More Topics & Lessons:

• Indicators List on Charts Menu in MetaTrader 4 Trading Platform
• MetaTrader 4 Meta-Editor: How to Place Index EA EAs
• Study Indices Basics & Indices Market Basic Concepts
• MetaTrader 4 Index Platform/Software Training Tutorial for Beginner Traders iPhone Trade App
• How to Get AS 51 Index in MetaTrader 4 App