Understanding the Triple Exponential Average (TRIX) for Strategic Trading

Triple Exponential Average (TRIX) is a powerful tool crafted by Jack Hutson, designed to gauge overbought and oversold conditions in the market.

It also doubles as a Momentum indicator, leveraging triple smoothing to filter out cyclical price movements that occur over shorter periods than TRIX itself.

This indicator helps you determine whether the market is overbought or oversold—indicated by positive and negative zones, respectively. A buy signal occurs when the TRIX crosses the zero line from below, known as "bullish divergence," while a sell signal is generated when it crosses from above, termed "bearish divergence". What sets TRIX apart is its exceptional ability to filter out price noise and its minimal lag, a common drawback of many moving averages.

Triple Exponential Average Indicator

How to Calculate TRIX:

First, we start by calculating the Exponential Moving Average (EMA) of the price:

EMA1(i) = EMA(Price, N, i)

Where:

Price(i): Current price;
N: EMA period;
EMA1(i): Current value of the Exponential Moving Average.

Next, we apply a second layer of smoothing to the resulting average, which is double exponential smoothing:

EMA2(i) = EMA(EMA1, N, i).

We then smooth the double Exponential Moving Average one more time to obtain the Triple Exponential Moving Average:

EMA3(i) = EMA(EMA2, N, i);

Finally, we compute the TRIX indicator itself:

TRIX(i) = (EMA3(i) - EMA3(i - 1))/ EMA3(i-1)

Understanding the Triple Exponential Average (TRIX) for Strategic Trading

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