True Strength Index

True Strength Index (or TSI) is an indicator of mometum, developed by William Blau. It was designed to determine the trend and reports overbuy and oversell states. It has quite the same properties of the RSI and MACD.

This indicator varies between 100 and -100

Calculation

TSI = 100 * TSI EMA (EMA (momentum, P1), P2) / EMA (EMA (Absolute value (momentum), P1), P2) where:

• MS (momentum, P1) = The exponential moving average and momentum of the P1 period
• momentum = Close of the day - Close of the previous day
• EMA (EMA (deviation, P1), P2) = The previous exponential moving average and of P2 period

Generally: P1 = 25 periods and P2 = 13 periods

A line of signal (Trigger) is also added for the exponential moving average of the TSI and P3 period (usually P3 = 7)

Example

Interpretation

The Stochastic TSI can be interpreted in several ways:

• Signal to buy or sell when the TSI is above 70, then the value is considered overbought and a downward correction may be made in the near future. Conversely, when the TSI is below 30, then the value is considered oversold and an upward correction could take place in the near future.
• Signal to buy or sell:  when the signal line crosses the curve of the TSI

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