Using True Strength Index Crossovers for Stock Entries and Exits

Summary

This long-only strategy uses the True Strength Index (TSI) and its EMA signal line to time entries and exits. It computes price change, smooths both the signed change and its absolute value through two successive EMAs, and divides the smoothed signed change by the smoothed absolute change. The resulting oscillator is scaled and compared with its signal line: an upward crossover opens a long position, and a downward crossover closes it. The described settings include separate long and short smoothing lengths, a signal length, initial capital, and a risk percentage.

The document gives a BTC/USDT futures backtest configuration over roughly a year, despite describing the approach as a stock strategy, and does not report returns or other test results. Its discussion warns that sensitive crossover signals may fail in choppy markets and that parameter choices affect interpretation. It suggests additional filters, stop rules, and position sizing, but the shown logic does not implement those protections; the stated risk amount is calculated but is not used to size the entry in the source.

Key ideas

• The TSI is formed by dividing double-smoothed price change by double-smoothed absolute price change.
• An upward TSI crossover above its EMA signal opens a long position, while a downward crossover closes it.
• The strategy uses separate long, short, and signal smoothing lengths.
• The source calculates a risk amount but does not use it to size the displayed position entry.
• The published setup uses BTC/USDT futures despite the stock-focused title, and no performance results are provided.

Tags

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