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Trix indicator measures the norm of price fluctuations, however for its calculation it does not use the Price, but rather its triple EMA.
The use of the triple EMA allows for the filtering out of additional “noise” in order to reveal the trend in its clearest possible view.
Formula Trix indicator calculated with a given N-day period as follows:
• Smooth prices (often closing prices) using an N-day exponential moving average (EMA).
• Smooth that series using another N-day EMA.
• Smooth a third time, using a further N-day EMA.
• Calculate the percentage difference between today's and yesterday's value in that final smoothed series.
Formula Trix = 1 – (2-(N+1)) = (N-1)/N+1 as for a plain EMA
TripleEMA= (1-f)³(p0+3fP1+6f²p2+10f³p3+…)
So, what is trix indicator and how do we use it? The trix reverses it, therefore positions can be opened as soon as the trix change direction.
Another way of using Trix is to draw a signal line, similar to the one used in the MACD.
That could be a 9-day Moving Average of the Trix indicator, itself. When the Trix rises above the signal line – it’s a buy signal, and when it falls below the signal line – it’s a sell.
Buy/sell signals based on crossover.
Yellow signal arrows – sell.
Blue signal arrows – buy.
Another signal is Divergence between Trix indicator and price movement, like a usual oscillator which is visually similar.
You can see this indicator displayed in a separate window from the chart.
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