Indicators
TSI Ergodic
The TSI Ergodic indicator is an enhanced version of the True Strength Index (TSI) that aims to provide a smoother and more accurate representation of market trends and potential reversals. It was developed by William Blau and is designed to reduce noise and increase the responsiveness of the TSI.
The Ergodic TSI line is plotted on a chart and oscillates around a centerline, typically at zero. It can take positive or negative values.
How to use it ?
Interpreting the TSI Ergodic:
Trend identification: Traders use the TSI Ergodic to identify the prevailing market trend. When the Ergodic TSI is above zero, it suggests a bullish trend, indicating potential buying opportunities. Conversely, when the Ergodic TSI is below zero, it suggests a bearish trend, indicating potential selling opportunities.
Signal line crossovers: The TSI Ergodic often incorporates a signal line (usually a 3-day EMA) to generate trading signals. Bullish signals occur when the Ergodic TSI crosses above the signal line, suggesting a potential uptrend or buy signal. Bearish signals occur when the Ergodic TSI crosses below the signal line, indicating a potential downtrend or sell signal.
Overbought and Oversold conditions: Traders can also assess overbought and oversold conditions using the TSI Ergodic. Values above a certain threshold (e.g., +25) indicate overbought conditions, suggesting a potential price reversal or correction. Values below a certain threshold (e.g., -25) indicate oversold conditions, suggesting a potential price bounce or reversal to the upside.
Divergence: Traders look for divergences between the TSI Ergodic and the price chart. Bullish divergence occurs when the TSI Ergodic forms higher lows while the price chart forms lower lows, indicating a potential reversal to the upside. Bearish divergence occurs when the TSI Ergodic forms lower highs while the price chart forms higher highs, suggesting a potential reversal to the downside.