True Strength Index Gold Analysis & TSI Trading Signals
True Trend Indicator
Created by William Blau
TSI is a momentum technical 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.
TSI is drawn as a blue line, the technical 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 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 shows a bullish cross-over signal, while center-line levels below the center-line shows 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 the same way as the RSI to determine general trend direction of markets. Overbought and over-sold 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 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 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 set-ups are:
Classic Trading 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 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 Technical Indicator
This can be used to identify overbought and oversold conditions in price action movements.
- Over-bought 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 levels cross above -25 level a buy signal is generated.
Sell trading signal - when the levels cross below +25 level a sell gets generated.
Over-sold - Buy Trade Signal
Over-bought - Sell Trading Signal
The overbought/oversold levels are indicated using horizontal lines drawn at the +25 and -25 levels.
Learn More Lessons and Tutorials:
- Types of Technical Trend Technical Indicators
- How Can I Trade Support Resistance Levels in an Upwards Gold Trend?
- Ten Gold Equity Management Strategies
- How to Do XAU USD Practice & Learn Trade the XAU USD Market Using Gold Demo Practice Account
- Moving Average MA Envelopes XAUUSD Indicator
- Characteristics of the Three Major Gold Sessions
