TRIX indicator is a convenient oscillator which displays the relative rate of triple exponentially smoothed average (EMA) change of the closing prices for a certain period. Jack Hutson, a famous trader, is the tool’s developer.
Before reading the article and writing your questions in the comments section, I recommend to watch this video. It’s not long but covers the biggest part of questions on the topic.
The prime description of the indicator is dated in 1980. Information about TRIX was presented by the “Technical Analysis of Stocks & Commodities” magazine, whose editor-in-chief was Hutson at that time. The oscillator filters the noises well and also determines the trend presence in the market at the moment.
TRIX description and settings
TRIX indicator calculation (Triple Exponential Moving Average) starts from the period selection for which the exponential moving average will be built.
The first Moving Average is calculated by the closing price. The second EMA is built based on the first, the third – based on the second. As a result, we obtain a triple smoothed exponential MA, for which there is calculated the percentage change per day.
However, it’s not required to calculate anything yourself, just specify the required values for the indicator’s parameters: there are four basic settings:
- Trix Period. This is the value of the period which is applied by the oscillator when creating the main moving average.
- Signal Period. The indicator also has a signal line in addition to the mainline. It is also a moving average, and this parameter displays its period. In any case, it should be less than the triple EMA.
- Signals are a setting by which it’s possible to get the signals (audio or visual) about the main and signal lines intersections.
For this it’s enough to set true. It’s possible to set false if you do not want to receive such messages.
- Count Bars is a parameter that specifies the number of candles counted when calculating the historical value of the TRIX indicator. It is believed that this oscillator use is most effective in the daytime working days when the market is the most active.
Since the current oscillator demonstrates the changes in nature in the closing price, it shows the market trends direction well. A downward trend prevails if the TRIX chart is located below zero, if above – an upward trend prevails.
The signal to buy is the signal line moving through the main from below. If the intersection occurs above, it is worth considering selling. Crossings which took place during the flat period are not recommended. Such signals turn out to be false in the majority of the overwhelming cases. The zero level crossing by the central line in any direction can also be quite perceived as a message about purchase/sell.
In this case, professionals advise to react to such signals not immediately, but after confirmation by other methods of technical analysis. TRIX indicator can be indicated by one line only on the web platforms. Another way to apply this oscillator is to learn the amplitude of the oscillations of its chart.
The peaks or valleys concentration near-zero marks the price consolidation and the high probability of a new impulse. Also, it’s possible to get a certain idea of the past market cycle nature while analyzing the distances between tops and bottoms.