Introduction to the Trix Indicator
Most oscillators tend to lean towards one end of the spectrum, either detecting short-term momentum or longer-term trend direction. Both types of oscillators have its advantages and disadvantages. One could be very responsive yet could easily produce false signals, while the other can have lesser false signals but could also be too lagging. The Trix Indicator, which is described as being based on a triple smoothed moving average, was developed to bridge the gap between short-term momentum oscillators and long-term trend indicators.
What is the Trix Indicator?
The Trix Indicator is a momentum indicator which is based on the Exponential Moving Average (EMA) and Smoothed Moving Average (SMMA). It is an oscillator type of indicator that plots two lines which oscillates around its midline which is zero. The blue line, which is the faster line, is the indicator’s main oscillator line. The red line is the slower line, which is its signal line based on the blue line.
Momentum direction can be identified based on how the oscillator lines crossover. The momentum direction is bullish if the blue line is above the red line. Inversely, the momentum direction is bearish if the blue line is below the red line. Crossovers between the blue line and the red line can be used as a momentum reversal signal.
How the Trix Indicator Works?
The Trix Indicator has an algorithm which is based on an underlying Exponential Moving Average line. It plots the blue oscillator line based on its calculations derived from the underlying EMA value. It then calculates for the signal line which is a Smoothed Moving Average of the EMA line.
How to use the Trix Indicator for MT4
The Trix Indicator has a couple of variables which modifies the sensitivity and characteristics of its oscillator lines.
“EMA” allows users to modify the number of periods used to calculate for its underlying EMA value.
“Signal” allows users to modify the number of periods applied on the calculation of the main oscillator’s signal line.
Buy Trade Setup
When to Enter?
Open a buy order as soon as the blue line crosses above the red line, while in confluence with another bullish technical indication.
When to Exit?
Close the trade as soon as the blue line crosses below the red line.
Sell Trade Setup
When to Enter?
Open a sell order as soon as the blue line crosses below the red line, while in confluence with another bearish technical indication.
When to Exit?
Close the trade as soon as the blue line crosses above the red line.
Conclusion
This oscillator is a very reliable momentum reversal signal indicator. The reversal signals it produces has a very high probability of resulting in an actual momentum reversal or even a longer trend reversal. However, it should still not be used as a standalone momentum reversal entry signal. Traders should still look for confluences with other technical indications such as a longer trend direction, divergences, or reversals from a support or resistance level. Doing so significantly increases the probability that the trade would result in profits.
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