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True Strength Index Stock Indices Technical Analysis and TSI Stock Indices Signals

True Stock Indices Trading Trend Indicator

Developed by William Blau


True Strength Index is a momentum indicator. The TSI is drawn by using a momentum calculation that reacts faster and is more responsive to stock index price changes, making it a leading indicator that follows stock index price action direction closely in the stock index market.


The True Strength Index is drawn as a blue line, the indicator also plots a signal line which is drawn as a red line, and these two lines are used to generate crossover signals.


True Strength Index also plots a histogram which shows the difference between the TSI Line and the Signal line. This histogram crosses above or below the center lines, histogram levels above the center line shows a bullish crossover signal, while center line levels below the center line shows a bearish crossover signal.

TSI Stock Indices Indicator



Stock Indices Technical Analysis and Generating Stock Indices Signals

The TSI uses various methods to generate stock indices signals. This stock indices indicator can be used in the same way as the RSI to determine general stock indices trend direction of the stock indices markets. Overbought and oversold levels can also be shown using TSI. The most common methods of generating trading signals are:


Zero line Crossover (Histogram crossover not Lines crossover)


  • Buy - when the histogram crosses above 0 a buy is generated
  • Sell - when the histogram crosses below 0 a sell is generated

TSI Stock Indices Indicator



Signal line Crossover


  • A buy is generated when the TSI line crosses above the Signal line
  • A sell is generated when the TSI line crosses below the Signal line


This signal is the same as the one above and the timing corresponds to the time when the histogram crossovers happen.



Divergence Stock Indices

Divergence is used to look for potential stock indices trend reversal point of a stock indices. The reversal divergence setups are:


Classic Divergence

Stock Indices Classic Bullish Divergence: Lower lows in stock index price and higher lows on the indicator

Stock Indices Classic Bearish Divergence: Higher highs in stock index price and lower highs on the indicator


Divergence trading can also be used in identifying potential stock indices trend continuation points in stock index price action direction. The continuation divergence trading setups are:


Hidden Divergence

Stock Indices Hidden Bullish Divergence: higher lows in stock index price and lower lows on the indicator

Stock Indices Hidden Bearish Divergence: lower highs in stock index price and higher highs on the indicator



Overbought/Oversold Levels

This can be used to identify overbought and oversold conditions in stock index price action movements.


  • Overbought condition - levels being greater than the +25 level
  • Oversold condition - levels being less than the -25 level


Trades can be generated when the TSI crosses these levels.

Buy signal - when the levels cross above -25 level a buy is generated.

Sell signal - when the levels cross below +25 level a sell is generated.

Buy Stock Indices Signal - Stock Indices Trading Trend Strength Indicator

Oversold


Sell Stock Indices Signal - Stock Indices Trading Trend Strength Stock Indices Indicator

Overbought


The overbought/oversold levels are indicated using horizontal lines drawn at the +25 and -25 levels.