Settings and Techniques - True Strength Index
What does true strength index? Technical momentum indicator helps determine oversold and overbought of security by incorporating short-term purchasing moment of the market with lagging advantages of moving average. Usually, 25 day exponential moving average is applied in difference between 2 share prices, and 13 day EMA is being applied to result, creating the indicator sensitive to the prevailing market condition,. After the date has smooth, few calculation arte being done to make indicator fall in the range of plus 100 or from plus 1.
True Strength Index – Settings and Techniques
At the present time, post will try to briefly address some of the recent interest I heard expressed for some various reasons TSI or True Strength Index indicator settings can be used. I will let you see some of the selections available, along with the demonstration that gives advantage to each other. The buy and sell technique of Zero line crossover and trend line break would also be illustrated.
The first chart makes simply the point that TSI (7, 4) settings are faster that the (13, 7) TSI. Believe me, the larger that you make those setting numbers, is the slower and the fewer that the signals would become.
3 Main Applications of TSI
• Overbought and the oversold indicator. In overbought or oversold market rates have increase or fallen and likely to retrace. The same to RSI it is possible as well to define the buy and sell zones. The market is considered to be over bought if the TSI are above 30 or below 30. In bear market or real bull, the level 40 and negative 40 maybe a good choice, this signals are reliable in the non trending market.
• Generation of buy and sell signal. Falling of TSI below 30 could be use as sell signal. The rising of TSI above 30 is buy signal. Generation of buy and sell using signal line. Calculate simple moving average with the default value of n=20 of TSI and use this is signal line. Buy signal is made if the TSI crosses signal line from above or below.
• Bullish and bearish divergence. The bullish divergence happens when TSI is making higher lows at the same time as the price show opposite tendency. These indicate weakening down trend. Analogously, bearish divergence happens when TSI (true strength index) creating lower highs at the same time as the price show opposite tendency. It indicates the up trends are weakening. You have to remember that though divergence indicates weakening trend, they still do not indicate the trend has reversed already.
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