TRIX indicator is an oscillator. This indicator is used to identify oversold and overbought markets. It can also be used as a momentum indicator. TRIX oscillates around a zero line. In TRIX oscillator an overbought market indicates a positive value and an oversold market indicates a negative value. Traders mainly use this indicator as a momentum indicator. When the momentum is increasing then it suggests a positive value and when momentum is decreasing then it suggests a negative value. In this indicator when crosses above the zero line then it gives a buy signal and when it closes below the zero line then it gives a sell signal. Also, the divergences between price and TRIX (triple exponential average) indicator can indicate significant turning points in the market.
Traders can know more about the TRIX indicator, then they can find it in the STUDIES section of Zerodha Kite. It also available in Kite mobile App. The default Period in this indicator is 14 and you can set the colour of the indicator from the parameter window. Traders can use this indicator on to any time-frame charts likes daily, weekly, monthly or intraday you can attach. You can also Check the image below to understand how to attach the TRIX indicator in HDFC Bank share price chart.
Advantages of TRIX Indicator:
(a) It is excellent filtration of market noise and (b) It is a tendency to be leading than lagging indicator- this is mainly advantages of this indicator. This indicator has the ability to lead a market because it measures the difference between each bar’s “smoothed” version of the price information. Traders and analysts can also use TRIX best in conjunction with another market-timing indicator and this minimizes false indications when it is interpreted as a leading indicator.
TRIX indicator combines trend with momentum. This indicator is similar to Moving Average Covergence Divergence or MACD and Price Oscillator or PPO. The standard setting for TRIX is 14-period for the triple smoothed EMA. In a shorter time frame, if traders change the default parameter to 5 instead of 14, it will make the indicator more volatile and better suited for centerline crossovers. Also, in a longer time frame, if traders change the default parameter to 45 instead of 14, this will smoothen the indicator. TRIX should be used in conjunction with other aspects of technical analysis as with other technical indicators.
Further Study: The Definitive Guide to Momentum Indicators by Martin J Pring.