Name, Sometimes Called:
Triple exponential smoothing of the log of the closing
price (TRIX)
Sometimes called Triple Exponential Average
Brief Description:
TRIX is based on a one-day difference of the triple-smoothed
exponential moving average of the closing price. The indicator eliminates
cycles shorter than the selected period. TRIX can function as a
momentum indicator and identify oversold and overbought markets.
Definitions, Formulas:
TRIX is a price-based oscillator.
It is based on a one-day difference of the triple-smoothed EMA
of closing price and eliminates cycles shorter than the selected
period. TRIX can serve two purposes: it can identify oversold and
overbought markets and function as a momentum
indicator.
Determine the number of periods (n), based on the trading
time frame.
We use n = 6, or k = 2 / (6+1) = 0.2857. See
Exponential
Moving Average (EMA).
Then calculate
EMA1TODAY = EMA(6)(ClosingPriceTODAY)
EMA2TODAY = EMA(6)(EMA1TODAY)
EMA3TODAY = EMA(6)(EMA2TODAY)
Using the same calculations for yesterday's closing price,
then
TRIX = (EMA3TODAY - EMA3YESTERDAY)
/ EMA3YESTERDAY
which produces a percentage value
TRIX is sometimes scaled by multiplying it by 100 or 10,000.
Also calculate
TRIXSIGNAL = EMA(n2)(TRIX)
To smooth the TRIX, we use n2 = 4. Others prefer 10 and
5, 14 and 12, or other combinations.
There is another formula for computing TRIX that uses the natural
log (ln, base e logarithm) in determining the value for EMA1.
ln(Cd) = natural log of closing
price for day d (“today”)
EMA1d = n-period EMA of
ln(Cd)
Empirical testing showed that the EMA-only formulation provided
more timely signals. We use it here.
Positive Development Calculation:
For this Technical Analysis
Indicator (TAI), a new positive development (NPD)
occurs when TRIX x+ TRIXSIGNAL
This TAI is no longer positive when
TRIX x- TRIXSIGNAL
If this TAI is still positive tomorrow,
it will no longer be new, but will be a cumulative positive development
(CPD).
If this TAI was a new positive development
(NPD)
yesterday, and is still positive today, then it becomes a cumulative
positive development (CPD).
History:
TRIX was first introduced by Jack Hutson, a past editor
and publisher of (Technical Analysis of) Stocks and Commodities
magazine in the early 1980s. More information on the background
of TRIX is available at http://www.traders.com/.
Two pertinent articles available for purchase are “TRIX: Triple
Exponential Smoothing Oscillator” by Jack K. Hutson (vol.
2, no. 3, http://store.traders.com/-v02-c03-trip-pdf.html)
and the original article “Good Trix” by Jack K. Hutson
(vol. 1 no. 5, http://store.traders.com/-v01-c05-good-pdf.html).
They are available for purchase on the Web site.
The chart below shows the TRIX indicator predicting a short term
price increase on 10/25/2005. In addition to the standard lines
we added a differential histogram to make it easier to see the differences
between the TRIX and TRIXSIGNAL.
Notice that TRIX became a new positive development on a day when
the price fell.
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