True Strength Index Indicator: Formula & How to Use

The True Strength Index (TSI) is a momentum oscillator that measures the direction and magnitude of price changes while smoothing out noise. You enter a period for the short-term smoothing (typically 13) and a period for the long-term smoothing (typically 25), and the calculator returns the TSI value, which ranges roughly between +100 and -100. A positive TSI indicates bullish momentum, a negative TSI indicates bearish momentum, and the most common trading signals come from centerline crosses and divergences with price.

Formula

The True Strength Index is built from a double-smoothed momentum calculation. The formula is:

TSI = 100 × (EMA_short(EMA_long(Momentum)) / EMA_short(EMA_long(|Momentum|)))

Where:

• Momentum = Current Close − Previous Close (with units in the same currency/price units as the chart)
• EMA_long = Exponential Moving Average using the long period (e.g., 25)
• EMA_short = Exponential Moving Average using the short period (e.g., 13)
• |Momentum| = Absolute value of momentum (always positive)

The first EMA smooths the raw momentum, and the second EMA smooths that result again. The same double smoothing is applied to the absolute momentum to create a normalizing factor. The ratio is multiplied by 100 to express the TSI as an oscillator.

Exponential moving averages are calculated recursively: EMA = (Price × k) + (Previous EMA × (1 − k)), where k = 2 / (period + 1). The first EMA value is typically seeded with the simple average of the first period data points.

Worked Example

Let’s compute the TSI for a small dataset using the default settings (short = 13, long = 25). Because a full 25-period calculation requires 25+ price bars, we’ll illustrate the steps with a simplified 5-bar example using short = 2 and long = 3 to show the mechanics. The calculator above uses your chosen periods on a full price series.

Suppose closing prices are: 100, 102, 101, 105, 107.

1. Momentum: 102−100=2, 101−102=−1, 105−101=4, 107−105=2.
2. First EMA (long=3) of momentum: seed with simple average of first 3 momentum values: (2−1+4)/3 = 1.667. Then apply EMA with k=2/(3+1)=0.5: next = 2×0.5 + 1.667×0.5 = 1.8335.
3. Second EMA (short=2) of the first EMA: seed with first value 1.667, then k=2/(2+1)=0.667: next = 1.8335×0.667 + 1.667×0.333 = 1.778.
4. Repeat steps 2 and 3 for absolute momentum values: |2|=2, |−1|=1, |4|=4, |2|=2. First EMA (long=3): seed = (2+1+4)/3 = 2.333; next = 2×0.5 + 2.333×0.5 = 2.167. Second EMA (short=2): seed = 2.333; next = 2.167×0.667 + 2.333×0.333 = 2.222.
5. TSI = 100 × (1.778 / 2.222) = 80.0.

With a full series and the default 13/25 periods, the calculator performs the same double smoothing over all available bars and returns a value between −100 and +100. The result in the headline box is the latest TSI value.

What the TSI Tells You

The TSI is designed to filter out short-term fluctuations and highlight the underlying momentum. Traders use it in three main ways:

• Centerline crossovers: When the TSI crosses above zero, bullish momentum is gaining; crossing below zero signals bearish momentum.
• Signal line crossovers: A common practice is to add a 7-period EMA of the TSI as a signal line. When the TSI crosses above its signal line, it’s a bullish signal; below, bearish.
• Divergence: If price makes a lower low but the TSI makes a higher low, that’s bullish divergence, suggesting selling pressure is weakening. Bearish divergence occurs when price makes a higher high but the TSI makes a lower high.

The TSI is similar to the Relative Strength Index (RSI) but smoother because of the double EMA. It tends to stay in a range and can be used for overbought/oversold levels, though extreme thresholds vary by market and timeframe—commonly ±25 for shorter timeframes, ±30 for longer ones.

How to Choose the Periods

The two periods control the sensitivity of the indicator. The original TSI, introduced by William Blau in 1993, used 25 and 13. Those remain the default because they work well on daily charts for many markets.

• Shorter periods (e.g., 10 and 5) produce a faster, more responsive TSI with more whipsaw signals.
• Longer periods (e.g., 50 and 25) produce a slower, smoother TSI that gives fewer but potentially higher-quality signals.
• Some traders use a 3-period EMA of the TSI as a signal line instead of 7, making signals even faster.

There is no universally optimal setting—it depends on the asset and timeframe. A good approach is to test different periods on historical data to see which ones produce the most consistent signals for your strategy.

Common Mistakes and Limitations

One frequent error is using the TSI on timeframes with too few data points. Because the indicator uses double exponential smoothing, it needs at least 3–5 times the long period in bars to stabilize. For a 25-period long smoothing, you should have at least 75–125 bars of price data.

Another mistake is treating the TSI as a standalone signal. Like all momentum oscillators, it can stay overbought or oversold for a long time during strong trends. A centerline crossover in a ranging market may generate false signals. Always combine the TSI with trend analysis (e.g., moving averages or price structure) and volume confirmation.

Also, note that the TSI is a lagging indicator—it’s based on past prices, so signals come after the move has begun. It works best in markets that trend, not in choppy, sideways conditions.

TSI vs. RSI and MACD

The TSI is often compared to the RSI and MACD because all three are momentum oscillators.

• RSI measures the ratio of average gains to average losses over a single period (typically 14). It’s more sensitive to recent price changes and can be noisier than the TSI.
• MACD uses two EMAs of price (12 and 26) and subtracts them, then smooths the difference. MACD measures the convergence/divergence of moving averages, while TSI measures smoothed momentum. MACD can be unbounded, while TSI is bounded between −100 and +100.

The TSI’s double smoothing makes it one of the smoothest momentum indicators, which can reduce false signals but also increases lag. Some traders prefer the TSI over RSI because it doesn’t have the same “flatline� issue during prolonged trends—RSI can stay at extreme levels, while TSI tends to return to the center more readily.

How to Use the TSI in a Trading Strategy

A practical way to use the TSI is to combine a centerline crossover with a trend filter. For example, on a daily chart, you might only take long signals when the price is above the 200-day moving average, and only take short signals when the price is below it. This avoids counter-trend trades.

Another approach is to use TSI divergences. When price makes a lower low but the TSI makes a higher low, that suggests the downtrend is losing steam. You could wait for a TSI centerline crossover to confirm a potential reversal before entering.

For swing trading, some traders use the TSI on a 4-hour chart with periods 13 and 25, and a signal line of 7. They enter when the TSI crosses above the signal line while the TSI is below zero (buy) or crosses below the signal line while above zero (sell). This is a classic momentum reversal strategy.

Frequently Asked Questions

What is the difference between TSI and Stochastic?
The Stochastic oscillator compares the closing price to the high-low range over a period, while the TSI measures smoothed momentum. Stochastic is more sensitive to recent price position, while TSI is smoother and focuses on the rate of change.

Can the TSI be used on any timeframe?
Yes, the TSI works on any timeframe—from 1-minute charts to weekly charts. However, the periods may need adjustment: shorter timeframes typically benefit from shorter periods to reduce noise, while longer timeframes can use the default 25/13.

What are good overbought/oversold levels for TSI?
There’s no fixed standard. Many traders use ±25 for daily charts, but you should adjust based on the asset’s volatility. For a more volatile asset, you might use ±30; for a less volatile one, ±20. Test on historical data to find levels that work.

Does the TSI work in cryptocurrency markets?
Yes, the TSI is used in crypto trading as well. Crypto markets are volatile, so the TSI can help identify momentum shifts, but be aware that false signals are common in highly volatile assets. Combining with volume and trend filters is recommended.

Why does my TSI look different from my trading platform’s TSI?
Differences can arise from how the initial EMA is seeded. Some platforms use the first price as the seed, others use a simple average of the first few prices. Also, the signal line period may differ. The formula itself is standard, but implementation details can cause small discrepancies.

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short | Short smoothing | - | 13 | 1
long | Long smoothing | - | 25 | 1
out tsi | True Strength Index | - | 100 * (ema(short, momentum) / ema(long, abs(momentum))) | 2