- Type of Indicator: Trend-Following
- Creator: Jack Hutson
- When Created: 1980s
- First Mentioned In: The TRIX was first mentioned in a technical analysis publication in 1981.
What Is The TRIX (Triple Exponential Average)?
The TRIX (Triple Exponential Average) is a momentum-based technical analysis indicator developed by Jack Hutson.
It is a triple exponential moving average (EMA) that oscillates around a zero line. It is primarily used to identify the direction and strength of a cryptocurrency’s trend.
The tool is designed to filter out short-term price fluctuations and highlight the underlying trend. This makes the tool useful for both short- and long-term traders.
The technical indicator is calculated by taking the percentage rate-of-change of a triple exponential moving average of the closing price.
The resulting line oscillates around a zero line, with positive values indicating upward momentum and negative values indicating downward momentum. The indicator can also be smoothed with a moving average to create a signal line.
How Do You Read The Triple Exponential Average?
The Triple Exponential Average provides traders with information about the direction and strength of a security’s trend.
When the TRIX line is above the zero line, it indicates that the trend is up. In contrast, a TRIX line below the zero line indicates that the trend is down. The further the TRIX line is from the zero line, the stronger the trend is believed to be.
Traders also look for crossovers between the TRIX line and the signal line to identify potential trading signals.
A bullish crossover occurs when the TRIX line crosses above the signal line, suggesting a possible upward price movement. A bearish crossover occurs when the TRIX line crosses below the signal line, suggesting a possible downward price movement.
How Does The Triple Exponential Average Work?
The TRIX works by taking the percentage rate-of-change of a triple exponential moving average of the closing price. This calculation smooths out short-term price fluctuations, highlighting the underlying trend.
How Is The TRIX Calculated?
Triple Exponential Average = 100 * EMA(EMA(EMA(Close, n), n), n) / EMA(EMA(EMA(Close, n), n), n) – 1
Signal Line = n-period Simple Moving Average of TRIX
The Encyclopedia Of Technical Market Indicators, Second Edition
28% Off $79.00 (as of 11/22/2024 16:47 GMT -05:00 – More infoProduct prices and availability are accurate as of the date/time indicated and are subject to change. Any price and availability information displayed on [relevant Amazon Site(s), as applicable] at the time of purchase will apply to the purchase of this product.)How Do You Use The TRIX?
Trend Direction: A bullish signal occurs when the TRIX line is above the zero line, indicating an uptrend. A bearish signal occurs when the TRIX line is below the zero line, indicating a downtrend.
Bullish/Bearish Crossovers: A bullish crossover occurs when the TRIX line crosses above the signal line, signaling a potential upward price movement. A bearish crossover occurs when the TRIX line crosses below the signal line, signaling a potential downward price movement.
Additional Trading & Risk Management Tips
Use the TRIX in conjunction with other technical indicators and chart patterns to improve the accuracy of your trading signals.
Be cautious when relying solely on the indicator. It can generate false signals in certain market conditions, such as during strong price reversals or volatile, choppy markets.
Practice proper risk management techniques to protect your investments. Always consider other factors in addition to the TRIX when making trading decisions.
Consider using the Triple Exponential Average in combination with other trend-following indicators, such as moving averages or the ADX (Average Directional Index). These tools can confirm the strength and direction of the trend, potentially leading to more accurate and reliable trading signals.
Be aware that the tool may perform differently in different market conditions. It’s essential to stay flexible and adapt your trading strategy as needed.
Keep in mind that the Triple Exponential Average is a lagging indicator. This means it reflects past price movements and may not accurately predict future price movements. Therefore, use it in conjunction with other technical analysis tools to make more informed trading decisions.
Monitor the TRIX for divergences with price movements, which can signal potential trend reversals. Bullish divergences occur when the price makes a lower low, but the indicator makes a higher low. Bearish divergences occur when the price makes a higher high, but the indicator makes a lower high.
Consider using the tool in conjunction with support and resistance levels or trendlines to confirm potential entry and exit points or to identify areas of confluence.
Test the tool on historical data to evaluate its effectiveness for your specific trading style and market conditions before incorporating it into your live trading strategy. Practice using the TRIX with a TradingView account to backtest performance.