Category: Indicator > Oscillators
The TRIX indicator is an oscillator used to identify oversold and overbought markets and it can also be used as a momentum indicator. As is common with many oscillators, TRIX oscillates around a zero line. When used as an oscillator, a positive value indicates an overbought market while a negative value indicates an oversold market. As a momentum indicator, a positive value suggests momentum is increasing while a negative value suggests momentum is decreasing. Many analysts believe the TRIX crossing above the zero line is a buy signal while closing below the zero line is a sell signal. Also, divergences between price and TRIX can indicate significant turning points in the market.
TRIX calculates a triple exponential moving average of the log of the Price input over the period of time specified by the Length input for the current bar. The current bar’s value is subtracted by the previous bar’s value. This prevents cycles shorter than the period defined by Length input from being considered by the indicator.
Two main advantages of TRIX compared to other trend-following indicators are its excellent filtration of market noise as well as its tendency to be a leading rather than a lagging indicator. It filters out market noise using the triple exponential average calculation thus eliminating minor short term cycles that may otherwise signal a change in market direction. Its ability to lead a market stems from its measurement of the difference between each bar’s "smoothed" version of the price information. When interpreted as a leading indicator, TRIX is best used in conjunction with another market timing indicator to minimize the effect of false indications.
Length - Number of bars used to calculate the TRIX
Price - Price used to calculate TRIX
INPUTS: PRICE(CLOSE), LENGTH(18);
IF CURRENTBAR > 1 THEN
PLOT1(TRIX(PRICE, LENGTH), "TRIX");
IF PLOT1 CROSSES OVER 0 THEN
ALERT("TRIX HAS CROSSED TO POSITIVE TERRITORY")
IF PLOT1 CROSSES UNDER 0 THEN
ALERT("TRIX HAS CROSSED TO NEGATIVE TERRITORY");