TSI - True Strength Index
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Technical Analysis -
Indicators of Technical Analysis
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William Blau is the author of True Strength Index. He published it in the "Technical Analysis of Stocks and Commodities" magazine in 1991.
TSI is a variation of Relative strength index and MACD. This indicator helps to identify prevailing market trend and oversold/overbought levels.
True Strength Index uses double smoothed EMA for its construction. EMA is used to smooth the price swings of the asset, but it also makes to catch the trend beginnings with just a small lag. The rising value of TSI means that the momentum gets stronger in the direction of the price move.
TSI formula/calculation looks like follows:
Mom = Pn – Pn-x
ABS Mom = ABS(Pn – Pn-x)
EMA1 = [EMA short of (EMA long of Mom)]
EMA2 = [EMA short of (EMA long of ABS Mom)]
TSI = (EMA1 / EMA2) * 100
Pn = today's price
Pn-x = price x chosen time periods ago (usually 1 day)
How to use TSI:
- Alike the RSI indicator, there are some oversold/overbought levels. The level of +25 points is considered being the limit for overbought market. The level of -25 points is considered to be the limit for oversold market.
- We can also trade the TSI and its EMA crossings.
- And we can trade the positive and negative divergences of the indicator and price chart, as well.
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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