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Technical Indicators

Fri, Jun 6th, 2025
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The descriptions, formulas, and parameters shown below apply to both Interactive Charts and Snapshot Charts, unless noted. Please note that some of the parameters may be slightly different between the two versions of charts.
Studies noted with * are available only in Snapshot Charts and those noted with ^ are available only in Interactive Charts.
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True Strength Index

Indicator Type: Standalone - Interactive Charts only

Developed by William Blau and introduced in Stocks & Commodities Magazine, the True Strength Index (TSI) is a momentum oscillator based on a double smoothing of price changes. Even though several steps are needed for calculation, the indicator is actually pretty straightforward. By smoothing price changes, TSI captures the ebbs and flows of price action with a steadier line that filters out the noise. As with most momentum oscillators, chartists can derive signals from overbought/oversold readings, centerline crossovers, bullish/bearish divergences and signal line crossovers.

The True Strength Index (TSI) can be divided into three parts: the double smoothed price change, the double smoothed absolute price change, and the TSI formula. First, calculate the price change from one period to the next. Second, calculate a 25-period EMA of this price change. Third, calculate a 13-period EMA of this 25-period EMA to create a double smoothing. The same double smoothing technique is used for the absolute price change. After these initial calculations, divide the double smoothed price change by the absolute double smoothed price change and multiply by 100 to move the decimal two places.

The first part, which is the double smoothed price change, sets the positive or negative tone for TSI. The indicator is negative when the double smoothed price change is negative and positive when it is positive. The double smoothed absolute price change normalizes the indicator and limits the range of the ensuing oscillator. In other words, this indicator measures the double smoothed price change relative to the double smoothed absolute price change. A string of large positive price changes results in relatively high positive readings because this signals strong upside momentum. A string of large negative price changes pushes TSI deep into negative territory.

Interpretation

The True Strength Index (TSI) is an oscillator that fluctuates between positive and negative territory. As with many momentum oscillators, the centerline defines the overall bias. The bulls have the momentum edge when TSI is positive and the bears have the edge when it's negative. As with MACD, a signal line can be applied to identify upturns and downturns. Signal line crossovers are, however, quite frequent and require further filtering with other techniques. Chartists can also look for bullish and bearish divergences to anticipate trend reversals; however, keep in mind that divergences can be misleading in a strong trend.

TSI is somewhat unique because it tracks the underlying price quite well. In other words, the oscillator can capture a sustained move in one direction or the other. The peaks and troughs in the oscillator often match the peaks and troughs in price. In this regard, chartists can draw trend lines and mark support/resistance levels using TSI. Line breaks can then be used to generate signals.

The centerline crossover is the purest signal. The double smoothed momentum of price changes is positive when TSI is above zero and negative when below zero. Prices are generally rising when TSI is positive and falling when TSI is negative.

(Source: www.stockcharts.com)

Sample Chart:

True Strength Index Chart
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