The Triple Exponential Average (TRIX) is a technical indicator used in the field of technical analysis to identify trends and generate trading signals. It was developed by Jack Hutson in the 1980s and aims to filter out short-term price movements to focus on the long-term trend.
TRIX is calculated using a triple smoothing of the underlying price series. It is based on the Exponential Moving Average (EMA) concept, which places greater weightage on recent data points. TRIX takes the EMA of a stock's closing prices, and further smoothes it with two more EMAs of different periods. The resulting line is called the TRIX line.
The TRIX line oscillates around a zero line, generating signals based on crossovers and divergences. When the TRIX line crosses above the zero line, it indicates a bullish trend, while a crossover below the zero line suggests a bearish trend. Traders often interpret the slope and steepness of the TRIX line to assess the strength of the trend.
One common strategy using TRIX is to look for bullish or bearish divergences between the price of an asset and the TRIX line. If the price is making lower lows, but the TRIX line is making higher lows, it suggests a potential reversal to the upside. Conversely, if the price is making higher highs, but the TRIX line is making lower highs, it indicates a potential bearish reversal.
However, it is important to note that TRIX is not a standalone indicator and is typically used in conjunction with other technical analysis tools to confirm signals. As with any technical indicator, it is always recommended to combine it with other forms of analysis and practice proper risk management when making trading decisions.
What is the best way to combine TRIX with other indicators?
The best way to combine TRIX with other indicators depends on your specific trading strategy and preferences. Here are a few commonly used techniques for combining TRIX with other indicators:
- Moving Average Crossover: Use a moving average crossover strategy in combination with TRIX. For example, if the TRIX line crosses above its signal line and the price is above the 50-day moving average, it can signal a bullish trend.
- Relative Strength Index (RSI): Combine TRIX with RSI to identify overbought or oversold levels. When TRIX shows a bullish signal and RSI is below a certain threshold (e.g., 30), it can confirm a potential buying opportunity.
- Bollinger Bands: Utilize Bollinger Bands with TRIX to identify potential breakouts or reversals. When the TRIX line breaks above the upper Bollinger Band, it can indicate a bullish signal, while a break below the lower Bollinger Band may suggest a bearish trend.
- Volume Analysis: Incorporate volume indicators, such as On-Balance Volume (OBV) or Chaikin Money Flow (CMF), with TRIX. When TRIX shows a bullish signal, and OBV or CMF confirms increasing buying pressure, it can strengthen the bullish bias.
- Moving Average Convergence Divergence (MACD): Combine TRIX with MACD to reinforce trend signals. For instance, when TRIX generates a bullish crossover above its signal line, while MACD also produces a bullish crossover, it can provide a stronger confirmation of a potential uptrend.
Remember, it's important to backtest any indicator combination to ensure it aligns with your trading strategy and provides consistent results in different market conditions. Additionally, consider adjusting indicators' parameters to suit your specific needs and time horizon.
How to calculate TRIX in Excel?
To calculate TRIX (Triple Exponential Average) in Excel, you can follow these steps:
- Choose a range of data that you want to calculate the TRIX for. Let's say it is in cells A1 to A10.
- Create a new column next to your data column, in column B, and label it "TRIX."
- In cell B3, enter the formula to calculate the first day's TRIX value: =(A3-A2)/A2
- Drag the formula down the column to calculate the TRIX values for the remaining days.
- In cell C3, enter the formula to calculate the EMA (Exponential Moving Average) for the TRIX values: =EXPONENTIAL(SMA(B3:B10, 14), 15) Note: It is assumed that you have the Analysis ToolPak add-in enabled for the SMA and EMA functions.
- Drag the formula down the column to calculate the EMA for the remaining TRIX values.
- In cell D3, enter the formula to calculate the TRIX: =(C3-C2)/C2
- Drag the formula down the column to calculate the TRIX for the remaining days.
The resulting column D will contain the TRIX values for your data range.
What is the typical period used for TRIX calculation?
The typical period used for TRIX (Triple Exponential Moving Average) calculation is 14 periods. However, the period can be adjusted based on the specific requirements or preferences of the user.