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TRIX indicator was created by Jack Hutton. He described it in "Technical Analysis of Stocks and Commodities" magazine.
TRIX construction is based on tripple smoothed moving average and used for trading trends. All cycles, that are shorter than the chosen period of moving average are eliminated.
Trix calculation:
Define the "x" value first. It depends on the time period we want to trade.
EMA1 = EMAx of Close
EMA2 = EMAx of EMA1
EMA3 = EMAx of EMA2
Example: If we decide to trade 9-day period, we calculate EMA9 of Close prices first. Then we calculate EMA9 of the first EMA9 and finaly EMA9 of EMA9(EMA9).
TRIX = (EMA9 n – EMA9 n-1) / (EMA9 n-1)
EMA9 n = Today's EMA9
EMA9 n-1 = Yesterday's EMA9
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How to use the TRIX indicator:
- When TRIX crosses Zero line upwards, we Buy. When it crosses Zero line downwards, we Sell.
- We go Long when TRIX rises above its Signal line (e.g. EMA12 of TRIX) while both curves are below the Zero line. We go Short if TRIX falls below its Signal line, while both curves are above the Zero line.
- We can also trade the Positive and Negative divergences.
In the end: TRIX can hold us nicely in a trending market. So we can save a lot of money for price swings when we would exit and enter our positions again. But TRIX is a moving average based tool, so the signals, it generates, are a bit late.
If you are interested in a deeper study of this technical indicator and prefer ready to serve solutions, this may be of interest to you. There you can find all the available indicators in Excel file for download.
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