M. H. Pee developed the trend intensity index indicator. Traders use the indicator to measure the strength of a trend of a sock, ETF index or any other listed security. The TII indicator apply RSI principles of calculation (applied to the closing price deviations) instead of the closing prices. In technical analysis TI index indicator helps to generate trading signals. The assumption is based on the stronger current trend is, the more likely analyzed stock (index, ETF, etc.) will continue moving in the direction of the on-going trend.
Trend Intensity Index Indicator FAQ
The trend intensity index has some of the same characteristics as RSI (relative strength index). Traders use this to identify the current market trend, whether it is up or down. With the help of the TII indicator, traders can enter into a trade and can ride until it shows a reversal signal.
The Trend Intensity Index indicator oscillates around 50% level in the 0 to 100% range. Therefore, The TII readings above 80% considers as an indication of a strong bullish trend. And TII readings below 20% considers as an indication of a strong bearish rend. The movement of the indicator toward 50% center line would suggest weakening of the on-going trend.
Pee recommends using a major period of 60 and a minor period of 30. The indicator ranges from a lower limit of 0 to an upper limit of 100. Here, a TII value above 50 signals consider an uptrend while below 50 is downtrend. There are overbought-oversold zone also. In default settings, above 80 is overbought and below 20 is oversold.
What is the Calculation of TII Indicator?
By applying RSI (Relative Strength Index) principles to the closing price deviations you can calculate the Trend Intensity Index indicator. There are few steps, these are as follows:
- First, calculate Simple Moving Average (SMA) of the closing prices:
SMA = SMA(Close, n)
There n is SMA bar period
- Then, calculate Positive and Negative deviation of the closing prices from SMA calculated in step 1
Dev = Close – SMA
IF Dev > 0 then posDev = Dev
IF Dev < 0 then negDev = abs(Dev)//absolute value
- After that, calculate sum of Positive and Negative deviations for the period. And it is twice smaller than period used for SMA calculation. For instance, if you calculated 60-bar SMA then the sum is calculated for 30 bars only.
SDpos = sum(posDev, m)
SDneg = sum(negDev, m)
Here, m is period twice smaller than n (period used to calculate SMA): m = n/2. If the bar period number (n) is not even then m = (n+1)/2.
- Calculate finally Trend Intensity index (TII)
TII = 100 * (SDpos) / (SDpos + SDneg)
- Lastly, calculate second line (Signal line) as EMA applied to TII
Signal Line = EMA(TII, k)
There k is bar period of EMA applied to TII
How To Apply Trend Intensity Index Indicator for Technical Analysis?
If traders can know more about the TII indicator, then they can find it in the STUDIES section of Zerodha Kite. It is also available in Kite mobile App. The default Field is Close and you can set this to open, High, Low, etc. The default Period is 14 and the Signal Period is 9. You can set and change these two values also. You can also check the image below to understand how to attach the TII indicator in HDFC Bank share price chart. Use this indicator on to any charts likes daily time frame, weekly time frame, monthly time frame or intraday time frame.
The next charting platform is Upstox Pro. There after adding scripts in the market watch. Open chart of any of the scripts. Then go to the indicator section. The indicator option will look like this. Now, put the name of the indicator in the blank space and click on apply.
The next technical charting platform is Upstox Pro. The application way is almost same as Zerodha kite. First, open any chart (make sure you added the script in the market watch). Then find the indicator section and type the indicator name there. After that, click on apply.
Top Profit Making Strategy of Trend Intensity Index
- The indicator ranges from a lower limit of 0 to an upper limit of 100
- A TII value is above 50 signals an growing uptrend
- On the other side, TII value of 80 shows that 80% of the total deviations are up.
- Once TI Index fall below 50, a downtrend is likely in place.
- There 50 represents a level that is trend-neutral.
- The closer the indicator is to 100, the stronger the current uptrend is.
- The closer value of TII is to 0, and the stronger the current downtrend.
- Another point is when the signal line crosses the TII line from above and it goes below it, buy signal generate. The exact opposite happen during the sell signal. Here, the red line is the signal like and the white line is the FII line.
- The last strategy is with MA (moving average). Here, to avoid the extra noise of TII, I add a 50 SMA (simple moving average) with the price chart. As you can see, I enter into the buy position when the price goes above MA line and TII line goes above the signal line. The opposite things I do in case of sell signal.
Like other oscillators, the TII is also bounded between 0 and 100. When the indicator shows a reading above 50, this indicates a bull trend. When the TII shows a reading below 50, a bear trend is probably present. The TII distances from the 50 level which is the greater the intensity of the current trend. The closer the Trend Intensity Index indicator is to one hundred, the stronger the bull trend. The closer this indicator is to zero, the stronger the bear trend.