True Strength Index (TSI) Analysis and TSI MT5 Indicator
Trend Strength Indicator - TSI Indicator - True Trend Trading Indicator
Created by William Blau
True Strength Index is a momentum technical indicator. The TSI is drawn by using a momentum calculation that reacts faster & is more responsive to price changes, making it a leading trading indicator that follows price action direction closely in the market.
TSI is drawn as a blue line, the indicator also draws a signal line which is drawn as a red line, and these two lines are used to generate crossover signals.
True Strength Index also draws a histogram which shows the difference between the TSI Line and the Signal line. This histo-gram crosses above or below the centerline, histo-gram levels above the centerline shows a bullish cross over signal, while centerline levels below the center-line shows bearish crossover signal.
Technical Analysis & How to Generate Signals
TSI uses various methods to generate trade signals. This indicator can be used in the same way as the RSI to determine general trend direction of currency markets. Overbought & oversold levels can also be shown using TSI. The most common methods of generating trade signals are:
Zero line Crossover ( Histogram crossover not Lines Trading cross-over )
- Buy - when the histogram crosses above 0 a buy gets generated
- Sell - when the histogram crosses below 0 a sell signal is generated
Signal line Crossover
- A buy signal gets generated when TSI line crosses above Signal Line
- A sell is generated when TSI line crosses below Signal Line
This signal is the same as the one above & the timing corresponds to the time when the histogram crossover happen.
Divergence Trading
Divergence is used to look for potential trend reversal point of a forex pair. The reversal divergence setups are:
Classic FX Divergence Setup
Classic Bullish Divergence: Lower lows in price & higher lows on the technical indicator
Classic Bearish Divergence: Higher highs in price and lower highs on the trading indicator
Divergence trading also can be used in identifying potential trend continuation points in price action direction. The continuation divergence trading setups are:
Hidden Divergence
Hidden Bullish Divergence: higher lows in price and lower lows on the technical indicator
Hidden Bearish Divergence: lower highs in price & higher highs on the trading indicator
Over-bought/Oversold Levels on Technical Indicator
This can be used to identify overbought & oversold conditions in price action movements.
- Over-bought condition - levels being greater than the +25 level
- Oversold condition - levels being less than the -25 level
Trades can be generated when TSI crosses these levels.
Buy signal - when the levels cross above -25 level a buy signal gets generated.
Sell trading signal - when the levels cross below +25 level a sell signal is generated.
Oversold - Buy Trading Signal
Overbought - Sell Trading Signal
The overbought/oversold levels are indicated using horizontal lines drawn at the +25 & -25 levels.
Study More Courses & Tutorials:
- The Morning Trades are The Most Traded FX Times in
- FX Currency Moves
- Gold MetaTrader 4 Bar Chart on XAU/USD Charts Menu
- SPX500 Stock Index Trading Strategy Course Download
- DJI30 DJI30 Stock Indices Trade Strategy
