TSI Indices Technical Analysis & TSI Trading Signals

Indices Trend Strength Indicator

Developed by William Blau

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

The TSI is drawn as a blue line, the indicator also plots a signal line which is drawn as a redline, and these two lines are used to generate cross over signals.

TSI also plots a histogram which shows the difference between the TSI Line & the Signal-line. This histogram crosses above the 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 cross-over signal.

Indices Technical Analysis and How to Generate Trading Signals

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

Zero line Indices Trading Crossover ( Histogram Indices Trading crossover not Lines Stock Indices Trading crossover)

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

Stock Indices Trading Signal line Indices Trading Crossover

• A buy is generated when TSI line crosses above Signal Line
• A sell is generated when 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 cross-overs happen.

Divergence Stock Indices Trading

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

Classic Indices Trading Divergence

Indices Trading Classic Bullish Divergence: Lower lows in price and higher lows on the indicator

Indices Trading Classic Bearish Divergence: Higher highs in price and lower highs on the indicator

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

Hidden Stock Indices Trading Divergence Setup

Indices Trading Hidden Bullish Divergence: higher lows in price and lower lows on the indicator

Indices Trading Hidden Bearish Divergence: lower highs in price and higher highs on the indicator

Overbought/Oversold Levels on Technical Indicator

This can be used to identify overbought & over-sold conditions in 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 TSI crosses these levels.

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

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

Oversold - Buy Trading Signal

Overbought - Sell Trading Signal

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