True Strength Index Gold Analysis & TSI Trading Signals
True Trend Indicator
Created and Developed by William Blau
TSI is a momentum indicator. The TSI is drawn by using a momentum calculation that reacts faster and is more responsive to price changes, making it a leading indicator which follows trading price action direction closely in the market.
TSI is drawn as a blue line, the technical indicator also plots a signal-line which is drawn as a red line, and these two lines are used to generate cross over signals.
TSI also draws a histogram which shows the difference between the TSI Line & the Signal-line. This histo-gram crosses above the or below the center-line, histogram levels above the center-line indicates a bullish cross over signal, while center-line levels below the center-line indicates a bearish cross over signal.
Analysis and Generating Signals
The TSI uses various different methods to generate trading signals. This trading indicator can be used in a similar way as the RSI to identify general and overall trend direction of the markets. Overbought and over-sold levels also can be displayed using TSI. The most common methods of generating signals are:
Zero line Trading Crossover ( Histogram XAUUSD crossover not Lines Gold cross-over)
- Buy - when the histogram crosses above 0 a buy signal gets generated
- Sell - when the histogram crosses below the 0 a sell gets generated
Gold Signal line Trading Crossover
- A buy gets generated when the TSI line crosses above the Signal-line
- A sell signal gets derived & generated when the TSI line crosses below the Signal-line
This signal is the same as the one above & the timing corresponds to the time when the histogram crossovers happen.
Divergence Trade
Divergence setup is used to look for potential trend reversal point of gold. Reversal divergence setups are:
Classic Divergence
Gold Trade Classic Bullish Divergence: Lower lows in price & higher lows on the technical indicator
Gold Trade Classic Bearish Divergence: Higher highs in price & lower highs on the technical indicator
Divergence trading also can be used in identifying potential trend continuation points in price action direction. The continuation divergence are:
Hidden Divergence Trading Setup
Gold Hidden Bullish Divergence: higher lows in price & lower lows on the technical indicator
Gold Hidden Bearish Divergence: lower highs in price & higher highs on the technical indicator
Over-bought/Oversold Levels on Indicator
This can be used to identify overbought & over-sold conditions in price action movements.
- Overbought condition - levels being higher than the +25 level
- Over-sold condition - levels being lesser than the -25 level
Trades can be generated/derived when TSI crosses these technical levels.
Buy signal - when the levels cross above -25 level a buy signal is generated.
Sell trading signal - when the levels cross below +25 level a sell gets generated.
Oversold - Buy Trade Signal
Overbought - Sell Trading Signal
The overbought/oversold levels are indicated using horizontal lines drawn at the +25 and -25 levels.
Learn More Tutorials and Courses:
- Types of Technical Trend Indicators
- How Do I Trade Support Resistance Levels in an Upwards XAUUSD Trend?
- Ten Gold Equity Management Strategies
- How to Do XAU/USD Practice & Learn Trade the XAU USD Market Using Gold Demo Account
- Moving Average Envelopes XAUUSD Indicator
- Characteristics of the Three Major Gold Sessions
