True Strength Index Gold Analysis & TSI Trading Signals
True Trend Indicator
Created 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 trading price changes, making it a leading indicator that follows trading price action direction closely in the market.
The TSI is drawn as a blue line, the indicator also plots a signal line which is drawn as a redline, and these two lines are used to generate cross over signals.
TSI also plots a histogram which shows the difference between the TSI Line & the Signal-line. This histogram crosses above the or below the center lines, histogram levels above the center-line shows a bullish crossover signal, while center-line levels below the center-line shows a bearish cross-over signal.
Analysis and Generating Signals
The TSI uses various methods to generate signals. This indicator can be used in the same way as the RSI to determine general trend direction of markets. Overbought and oversold levels also can be shown using TSI. The most common methods of generating signals are:
Zero line Trading Crossover ( Histogram XAUUSD crossover not Lines Gold crossover)
- Buy - when the histogram crosses above 0 a buy gets generated
- Sell - when the histogram crosses below the 0 a sell gets generated
Gold Signal line Trading Crossover
- A buy gets generated when TSI line crosses above Signal Line
- A sell gets generated when 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 cross overs happen.
Divergence Trading
Divergence is used to look for potential trend reversal point of gold. Reversal divergence setups are:
Classic Trading Divergence
Gold Trade Classic Bullish Divergence: Lower lows in price & higher lows on the indicator
Gold Trade Classic Bearish Divergence: Higher highs in price & lower highs on the indicator
Divergence trading can also be used in identifying potential trend continuation points in price action direction. The continuation divergence are:
Hidden Divergence Setup
Gold Hidden Bullish Divergence: higher lows in price & lower lows on the indicator
Gold Hidden Bearish Divergence: lower highs in price & higher highs on the indicator
Overbought/Oversold Levels on Indicator
This can be used to identify overbought and oversold conditions in price action movements.
- Overbought condition - levels being greater than the +25 level
- Oversold condition - levels being less than the -25 level
Trades can be generated when TSI crosses these levels.
Buy signal - when the areas cross above -25 level a buy is generated.
Sell signal - when the levels cross below +25 level a sell gets generated.
Oversold - Buy Signal
Overbought - Sell Signal
The overbought/oversold levels are indicated using horizontal lines drawn at the +25 and -25 levels.
