The triple exponential average (TRIX) indicator is an oscillator that may also be used as a momentum indicator. Its primary purpose is to determine whether a market has become oversold or overbought. Like many others, TRIX is an oscillator that revolves around a zero line. When used as an oscillator, an obvious positive number indicates that the market is overbought, while an obvious negative value suggests that the market is oversold. If TRIX indicates momentum, a positive number says that momentum is rising, while a negative value suggests that momentum is diminishing. There is a widespread consensus among market experts that the TRIX sends a signal to purchase when it closes above the zero line and sends a signal to sell when it closes below the zero line. Also, diverging between the price and the TRIX may identify key turning events in the market.

TRIX computes a triple exponential moving average based on the log of the price input over the period given by the length input for the current bar. This average is then used to make trading decisions. The current bar's value is reduced by the value of the bar that came before it. Because of this, cycles with a duration less than the time specified by the length input are excluded from the indicator's analysis.

How does the TRIX indicator work for traders?

The TRIX indicator, in its most basic form, produces the following three interpretations, all of which are very comparable to the interpretations produced by the Moving Average Convergence Divergence (MACD):

1、Zero-Line Crossovers

A zero-line crossover signal is generated as the TRIX indicator makes its way around a zero line. This signal may be used to assist in determining the movement of the market.

The TRIX transitions from negative to positive when it moves over the zero line from bottom to top. This suggests that the trend has changed in a positive direction. Traders may thus search for openings in the market to place purchase orders and hunt for chances.

Negative values are assigned to the TRIX if it moves in a direction that takes it below the zero line. This suggests that the trend has changed in a negative direction, so traders should be looking for chances to place sell orders in the market.

2、Signal Line Crossovers

Traders sometimes superimpose a signal line on top of the TRIX indicator to determine the suitable entry opportunities. The signal line is a moving average of the TRIX indicator, so it will be behind the indicator. This is because the signal line will be calculated after the indicator.

When the indicator travels over the signal line from below, this is seen as a bullish indication. On the other hand, a bearish event occurs when the indicator crosses the signal line in the opposite direction from where it started. Traders can use this strategy in markets that are either range or trending.

In a market that is moving in a range, the crossing of a signal line shows that both resistance and support regions have been maintained. A signal line crossing in a market that is already moving confirms that the price retracement is ended and that the primary trend has resumed.

3、Bullish and Bearish Divergences

The TRIX indicator can also help identify when significant turning points in the market will occur. Divergences occur when the price of a stock is going in the opposite direction as the indicator.

When the underlying stock price makes a lower low while the TRIX makes a higher low, this indicates a positive divergence in the market. Whenever this occurs, it strongly indicates that a positive price reversal is likely to occur and that the downward trend is about to lose steam.

When the TRIX reaches a lower high and the underlying stock's price reaches a higher high simultaneously, this indicates a bearish divergence. This suggests that a negative price reversal will occur and that the uptrend is losing momentum or weakening.

When the price of a stock and the indication do not corroborate, a bullish or bearish divergence has formed in the market.

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