True Strength Index: Double-Smoothed Momentum Oscillator

Summary

The True Strength Index (TSI) is presented as an oscillator calculated from close-to-close price changes. It first smooths the signed price change and the absolute price change with a primary exponential moving average, then applies a secondary exponential moving average to both series. The indicator is their ratio, scaled by 100, so it expresses smoothed directional movement relative to smoothed absolute movement.

The described indicator has four adjustable settings: two smoothing periods and overbought and oversold levels. The document explains the calculation but gives no parameter values, trading rules, chart examples, or empirical results. It therefore serves as a concise indicator definition rather than evidence that TSI signals have predictive value; interpretation and use require further specification and testing.

Key ideas

• TSI compares smoothed signed price changes with smoothed absolute price changes.
• The calculation applies two stages of exponential smoothing to both series.
• The resulting ratio is multiplied by 100 to form an oscillator.
• Users can adjust two smoothing periods and overbought and oversold levels.
• No trading rules or evidence of performance are supplied.

Tags

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