Saturday, April 21, 2012

Triple Exponential Moving Average (TRIX)

TRIX - quick summary

TRIX is known as Triple Exponential Moving Average and is based on a 1-day difference of the triple EMA. The indicator was developed by Jack Hutson in 1980s.

TRIX is a remarkable trend following-indicator: its main advantage over the similar indicators lies in its ability to filter a large portion of the market noise. TRIX eliminates short-term cycles (the cycles shorter than the selected TRIX period) which may interfere with trading by signaling about minor changes in market direction.

Trading with TRIX indicator

TRIX oscillates around zero, which allows traders to follow trend directions.

TRIX reading above zero suggests an uptrend, while reading below - a downtrend.

While above zero a rising TRIX line suggests acceleration higher while a declining line - still an upward move but at a slower pace, or a beginning of a reversal. Opposite true for the downtrend.

Trading crossover signals

 The default & common value for TRIX is 14 period.

An additional signal line is added to TRIX to help trade TRIX crossovers.

To make TRIX react faster to changes in a trend, we recommend using TRIX period = 12, with the signal line = 4.

TRIX divergence

TRIX divergence is similar to trading with MACD divergence: where on the chart higher highs in an uptrend (or lower lows in a downtrend) are not confirmed by TRIX.

If you'd like to have an additional reversal confirmation, wait till TRIX crosses its zero line.

TRIX and breakouts

TRIX's indicator position in relation to its zero line helps to anticipate directions of breakouts:

1. Trading range breakouts during the trend - whipsaws and real breakouts.

2. Trend line breakouts. 

Despite the versatility and accuracy of the TRIX indicator when it comes to filtering out market noise, it is still recommended to pay attention to other indicators and signals that can help to improve trading performance.

TRIX Formula

The TRIX is calculated as follows:
The default & common value for TRIX is 14 period.
Step 1. EMA #1: calculate a 14-period exponential moving average of today's closing price
Step 2. EMA #2: calculate a 14-period exponential moving average of EMA #1
Step 3. EMA #3: calculate a 14-period exponential moving average of EMA #2
Step 4. TRIX = ( EMA #3 of today - EMA #3 from yesterday ) / EMA #3 from yesterday.
This will give a percentage value to be used for building TRIX indicator graph.

Trix_EA.mq4 (expert)


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