The TRIX (or Triple Exponential Average) was developed in the early eighties by Jack Hutson, editor of the magazine “Technical Analysis of Stocks and Commodities”.
The dream of Hutson was to get an indicator that could filter the false signals in a trading system.
The TRIX is an oscillator of momentum that displays the percentage variation of a triple exponential moving average weighted, calculated on the close price of an asset.
For its characteristics, traders use the Trix to identify trend reversal.
TRIX: What is it?
The TRIX can take positive or negative values, fluctuating around its average value.
It can filter the small settling movements of action, even those little significant compared to its main trends.
To do this, you need to choose a certain number of periods on which calculate the moving average.
The TRIX will filter all shorter cycles of the chosen period.
Usually, traders set the exponential moving averages to 15 periods. Each trader must customize settings based on reference timescale.
Every time the Trix crosses the zero line, we have a trading signal.
Whenever the oscillator changes from negative to positive values, we have a buy signal.
From positive values to negative, we have a sell signal.
In addition, it is possible to plot a moving average of a shorter period and use it to expect the movements of the Trix and generating trading signals.
The method described above is however not very effective for trading. Much more useful is the use of the Trix exploiting the divergences between oscillator and prices.
The TRIX can, in fact, be used to expect the reversal points within a trend by exploiting the divergence of the same regarding the trend-line prices.