True Strength Index (TSI), introduction
Introduce TSI as a double-smoothed momentum oscillator and compare its read to stochastic's.
Lesson path
Technical Analysis + Price Action
Stochastic and Momentum
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Introduce TSI as a double-smoothed momentum oscillator and compare its read to stochastic's.
A momentum oscillator that ranges from -100 to +100
Most momentum oscillators we have met - stochastic, RSI, StochRSI - share a 0 to 100 scale with a 50 midline. The True Strength Index, or TSI, takes a different scale. It ranges from roughly negative 100 to positive 100, with zero as the bias midline. Above zero, the recent price changes have been net positive. Below zero, net negative. William Blau introduced TSI in the early 1990s as a smoother, slower momentum measure that traders could read for trend bias instead of for fast OB/OS triggers.
The formula is double-smoothed. Step one: take the one-period price change (today's close minus yesterday's close). Step two: smooth that series with an EMA of length 25, then smooth the result with an EMA of length 13. Call that the double-smoothed price change. Step three: do the same double smoothing on the absolute value of the price changes. Step four: divide the first by the second, multiply by 100. The output is TSI. Two layers of EMA on top of raw price change makes the line considerably smoother than raw %K.
How traders read TSI. First, the zero line is the bias check. TSI above zero = bullish lean. TSI below zero = bearish lean. Crossings of the zero line are bias-change signals, slower and more reliable than stochastic crosses but later. Second, some traders draw a 7-period EMA of TSI on top of the line as a signal line, similar to %D on stochastic. Crosses between TSI and its signal line work as triggers. Third, divergence between price and TSI reads exactly the same way as divergence with stochastic - regular for exhaustion, hidden for continuation.
When to reach for TSI over stochastic. If your style is higher timeframe, trend-following, with fewer trades and longer holds, TSI suits you. Its smoothness reduces whipsaw and the zero-line bias is a clean directional filter. If your style is faster, mean-reverting at range edges, with more trades per session, stochastic is the better fit. Same family of indicators, different operating points. There is no rule that says you have to pick. Many traders use both, but in this curriculum the discipline is to use one well before adding a second.
Recap: TSI = double-smoothed price change / double-smoothed absolute price change, times 100. Range roughly -100 to +100, zero is the bias midline. Smoother than stochastic, slower to signal, cleaner trend-bias reads. Zero cross = bias change.
Knowledge check
Answer before moving on.
1. What range does TSI typically operate on?
2. TSI is described as double-smoothed. What exactly is smoothed twice?
3. Which trader profile is most likely to prefer TSI over stochastic?
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