True Strength Index: How to Use It

The True Strength Index (TSI) is a momentum oscillator that helps traders gauge trend direction and strength while filtering out market noise. You enter price data (typically high, low, and close prices for a given period), and the calculator returns the TSI value, which oscillates around zero. Positive values indicate bullish momentum, negative values indicate bearish momentum, and the magnitude shows strength. The TSI is often used with a signal line (a smoothed average of the TSI) to generate buy and sell signals.

Formula

The True Strength Index is calculated as:

TSI = 100 × (EMA_s(EMA_l(Price) – EMA_s(Price))) / (EMA_s(EMA_l(|Price – PrevPrice|)))

Where:

• Price – the chosen price value (close, high, low, or typical price) for each bar.
• EMA_l – exponential moving average over the long period (default 25).
• EMA_s – exponential moving average over the short period (default 13).
• Signal smoothing – the period for the final EMA applied to the TSI to create the signal line (default 7).
• PrevPrice – the price from the previous bar.

The numerator is the difference between two EMAs of price, smoothed again. The denominator is the smoothed absolute difference between consecutive prices. The ratio is multiplied by 100 to express as a percentage.

Worked Example

Using the default settings: short period = 13, long period = 25, signal smoothing = 7, price type = Close. Let’s assume we have a series of closing prices (in dollars) and we want to compute the TSI after enough bars for the EMAs to stabilize. For simplicity, we’ll use a small dataset with 30 bars, but the calculator uses the full series you provide.

Step 1: Calculate the first EMA of the price with period 25 (long). This is a standard exponential moving average.

Step 2: Calculate the second EMA of the price with period 13 (short).

Step 3: Subtract the short EMA from the long EMA for each bar.

Step 4: Smooth the result with an EMA of period 7 (signal smoothing). This gives the numerator.

Step 5: Calculate the absolute difference between consecutive closing prices: |Close_t – Close_t-1|.

Step 6: Apply the long EMA (25) to this absolute difference series.

Step 7: Apply the short EMA (13) to the result of step 6.

Step 8: Apply the signal smoothing EMA (7) to the result of step 7. This gives the denominator.

Step 9: Divide the numerator by the denominator, multiply by 100.

For example, if the numerator is 0.5 and the denominator is 10, then TSI = 100 × (0.5 / 10) = 5.00. The calculator outputs this value rounded to two decimals.

When to Use the TSI

The TSI is useful for identifying trend direction, spotting overbought/oversold conditions, and detecting divergences. It is often used on daily or weekly charts for swing trading, but can be applied to any timeframe. The signal line crossover is a common trading trigger: when the TSI crosses above its signal line, it’s a bullish signal; crossing below is bearish. The zero line also acts as a reference – above zero indicates bullish momentum, below zero indicates bearish momentum.

How to Read the Result

The TSI value ranges from -100 to +100. A value above zero suggests bullish momentum, below zero suggests bearish momentum. The magnitude indicates strength: higher absolute values mean stronger momentum. The signal line is a smoothed version of the TSI; when the TSI crosses above the signal line, it suggests buying pressure, and when it crosses below, selling pressure. The histogram (TSI – signal) shows the difference, which can help visualize the crossover.

Common Mistakes

• Using inconsistent price types: Ensure you use the same price type (close, high, low, typical) for the entire calculation. Mixing them will produce meaningless results.
• Ignoring the need for sufficient data: EMAs need enough bars to stabilize. Using too few bars (e.g., fewer than 3 times the long period) can give erratic early values.
• Misinterpreting overbought/oversold: Unlike RSI, the TSI does not have fixed overbought/oversold levels. Values above +25 or below -25 are often considered strong, but these are not absolute thresholds.
• Using the TSI in isolation: The TSI is a lagging indicator; it works best when combined with price action analysis and other indicators.

Tips

• Experiment with different periods. The default (13, 25, 7) is common, but some traders prefer (3, 14, 5) or (5, 20, 5) depending on the asset and timeframe.
• Use the TSI to confirm trends. If the TSI is rising while price is making higher highs, the trend is strong. If the TSI is falling while price makes new highs, it may signal a weakening trend (bearish divergence).
• Combine the TSI with support/resistance levels or moving averages to filter signals.
• For daily charts, a signal line crossover can be used as a trade trigger, but confirm with volume or other indicators.

Limitations

The TSI is a lagging indicator – it uses smoothed data, so it may give late signals in fast-moving markets. It also does not predict price levels; it only measures momentum. The formula requires a sufficient history of price data; if you have fewer than about 3 times the long period, the early values may be unreliable. Additionally, the TSI is not a standalone trading system – it should be used with other analysis.

Troubleshooting

If you get a division by zero error, it means the denominator (the smoothed absolute price difference) is zero. This happens when the price is constant over the entire period – for example, a flat market with no price movement. In such a case, the TSI is undefined; you can treat it as 0 or wait for price movement.

If your TSI values seem extremely high or low (e.g., above 100 or below -100), check that you have entered the price data correctly and that the periods are positive integers. Also, ensure you are using the correct price type consistently.

If the TSI is not reacting to price changes as expected, increase the smoothing periods to reduce noise, or decrease them to make it more sensitive.

Frequently Asked Questions

What is the difference between TSI and RSI?

Both are momentum oscillators, but TSI uses double smoothing (EMA of EMA) which makes it less noisy and more responsive to sustained trends. RSI uses average gains and losses over a period, which can be more choppy.

What are the best settings for TSI?

There is no universal best; it depends on the asset and timeframe. Common defaults are 13 (short), 25 (long), and 7 (signal). Some traders use 3, 14, 5 for faster signals, or 5, 20, 5 for a balance.

Can TSI be used for day trading?

Yes, but you need to adjust the periods to be shorter (e.g., 3, 10, 5) and use it on intraday charts. However, the TSI is a lagging indicator, so it may not be the best for very short timeframes like 1-minute charts.

How do I interpret a TSI divergence?

If price makes a higher high but the TSI makes a lower high, it’s a bearish divergence, suggesting the uptrend may be losing momentum. Conversely, a lower low in price with a higher low in TSI is a bullish divergence.

Does TSI work on all markets?

Yes, TSI can be applied to any market with price data – stocks, forex, crypto, commodities, etc. The formula is universal.

Why does my TSI show a value above 100?

The TSI is theoretically bounded between -100 and +100, but due to rounding or extreme price moves, it might show values slightly outside. If it’s significantly above 100, check your data for errors.

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in t | Time period (short) | bars | 13 | 1
in l | Time period (long) | bars | 25 | 1
in s | Signal smoothing | bars | 7 | 1
in p | Price type | Close=1, High=1.02, Low=0.98, Typical=(H+L+C)/3 | 1
out tsi | True Strength Index | - | 100 * (ema(ema(p, l) - ema(p, s), s)) / (ema(ema(abs(p - prev(p)), l), s)) | 2
out signal | Signal Line | - | ema(tsi, s) | 2
out hist | Histogram | - | tsi - signal | 2