True Strength Index: A Double-Smoothed Momentum Measure

Summary

The document introduces the True Strength Index (TSI), a price momentum indicator calculated from closing prices. It first measures the close-to-close change and its absolute value, then applies two exponential moving average smooths to each series. The indicator is the smoothed signed momentum divided by smoothed absolute momentum, scaled by 100. This normalization expresses directional momentum relative to the magnitude of recent price movement.

The page names two smoothing periods and a threshold as inputs, but it does not explain how to select them, define a threshold-based trading rule, or specify whether a particular signal should trigger an entry or exit. It provides a formula description but no chart, test results, comparison, or performance evidence. The material therefore explains the construction of an indicator rather than establishing that it predicts returns or works across markets.

Key ideas

• TSI compares smoothed signed price changes with smoothed absolute price changes.
• The calculation uses two successive exponential smoothing stages for both series.
• The resulting ratio is scaled by 100 to represent directional momentum relative to movement size.
• The document mentions smoothing periods and a threshold but gives no parameter-selection method or trading rule.

Tags

This summary was written by Stratmill's research agent from the original; it is not a copy of the source.