TSI Indicator for MT4

Introduction to the TSI Indicator

Oscillators are useful indicators that present trend direction, momentum, as well as potential market reversals by plotting lines or bars that oscillate within a given range or around a midpoint.

The TSI Indicator is a modification of basic oscillator which plots an oscillator that is very responsive to price changes.

What is the TSI Indicator?

The TSI Indicator is a momentum oscillator which is a modified version of the True Strength Index (TSI) oscillator.

This oscillator plots a single line which oscillates around zero. The line it plots is characteristically very jagged, which is very different from the original True Strength Index.

This indicator is typically used to identify trends and trend reversals.

Trending markets can be identified based on whether the line is generally positive or negative. The TSI line is typically positive in an uptrend and negative on a downtrend.

It may also be useful for identifying overbought and oversold markets. However, overbought and oversold levels may vary depending on the market, as well as the settings used on the indicator.

It can also be used for identifying divergences and its potential trend reversals.

How the TSI Indicator Works?

The TSI Indicator has a very complex formula which is applied within its algorithm. Below is the series of formulas used for the standard TSI oscillator.

TSI = (PCDS/APCDS) x 100

PC = CCP – PCP

PCS = 25-period EMA of PC

PCDS = 13-period EMA of PCS

APC = AVCCP – PCP

APCS = 25-period EMA of APC

APCDS = 13-period EMA of APCS

where:

PCDS = PC double smoothed

APCDS = Absolute PC double smoothed

PC = Price change

CCP = Current close price

PCP = Prior close price

PCS = PC smoothed

EMA = Exponential moving average

APC = Absolute PC

APCS = Absolute PC smoothed​

This version of the TSI Indicator modifies the standard 25-period EMA and 13-period EMA used for the Absolute Price Change and Absolute Price Change Smoothed. Instead, it uses a preset of a 5-period EMA and 8-period EMA, which creates a more jagged oscillator line.

How to use the TSI Indicator for MT4

The TSI Indicator has a couple of modifiable variables within its indicator settings which would change the characteristics of its oscillator line.

“First_R” allows users to modify the number of periods used for its first underlying EMA value.

“Second_S” allows users to modify the number of periods used to its second underlying EMA value.

Buy Trade Setup

When to Enter?

Open a buy order on the confluence of a bullish divergence pattern and price action showing signs of a possible bullish reversal.

When to Exit?

Close the trade as soon as price shows signs of a possible bearish reversal.

Sell Trade Setup

When to Enter?

Open a sell order on the confluence of a bearish divergence pattern and price action showing signs of a possible bearish reversal.

When to Exit?

Close the trade as soon as price shows signs of a possible bullish reversal.

Conclusion

Divergence reversal trading is just one of the many ways the TSI Indicator can be used. As mentioned above, it can be used for mean reversals. However, traders should set their own marker levels to identify potential overbought and oversold reversals.

This indicator can also be modified to make it more similar to the standard TSI oscillator. This can be done by changing the number of periods it uses.

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