|Parameter Defaults:||Length||9||controls the measurement period for the exponential averages|
TRIX was developed by Jack Hutson, a past editor of the Technical Analysis of Stocks and Commodities magazine.
TRIX is a triple exponential moving average of the log of price. It may be used an oscillator used to identify oversold and overbought markets but its strength is more in its ability to track basic market direction. It oscillated around a zero line which some traders use as a trading signal itself, although this may provide a late entry. As a momentum indicator it does provide divergences at trend reversal and as with most indicators it is best utilized with other techniques that confirm price direction, or reversal in direction.
The chart above displays several uses of TRIX. The first on the left displays that similar to the momentum indicator, a rising TRIX above zero suggests acceleration higher while a declining line above zero indicates higher prices but at a slower pace, or the beginning of a reversal. When used in conjunction with other techniques such as simple trend lines and support and resistance lines, the full effect of TRIX can be achieved.
The second example displays a mild bearish divergence and as TRIX declines (but above zero) price breaks below the trend support line. Later, as TRIX remains negative price support is broken to confirm lower prices.