hello everyone. A very warm welcome in third week of 6th season. The professor @kouba01 has discussed the Trix indicator this week. This is my homework task.
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Discuss in your own words Trix as a trading indicator and how it works
Trix indicator is a technical mometum based indicator which is use to determine the price trend in the market. The traders use it in their technical analysis to analyze the market trend and then can decide their future moves in the market. The Trix matric is a single oscillating line which move around the zero line on the chart. The trix indicator look like the MACD indicator and move at the bottom area of the chart. There is an indicator line which move up and down regarding the movement of the price. Another line around which the trix line is move is the Zero line. By analyzing the movement of trix line around the zero line, the traders can determine whether the market is in uptrend or downtrend.
The EMA is very well known useful indicator which also use to determine the market trend. This indicator is used widely in technical analysis. It main feature is that it react to the price change very fastly. The price fluctuation is reacted very quickly by the EMA. That's why, sometime the false and irrelevent signals are produced. the noise is generated by the quick and fast reacting on price change. The noise do not let the traders to get the clear view of market. Thus they can not analyze the market well nor they can trade effectively.
To solve this matter, the Trix indicator was being introduced. The trix indicator is was developed in 1980 by Jack Huston. The basic motive behind creation of this indicator was to remove the noise and the false signals from the chart. This indicator is calculated by using the value of three exponential which smooth the price representation on the chart.
This indicator minimize the reactant effect on price by combining with three EMAs. Not just filter out the noise, but helps the traders to determine in which direction the market is going. The traders can identify the traps in the market and then can take the important steps to get high profit and safe from lose.
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How Trix Indicator Works
As i mentioned above, The Trix matric has a single oscillating line which move around the zero line on the chart. We basically have two lines in trix indicator.. There is an indicator line which move up and down regarding the movement of the price. Another line around which the trix line is move is the Zero line. By analyzing the movement of trix line around the zero line, the traders can determine whether the market is in uptrend or downtrend.
When the trix line cross the zero line while moving upward direction, this indicate that there is bullish trend. This produce the buy signals. Traders should enter into the market to get the good profit. When the trix line cross the zero line while moving downward, it indicate that there is downtrend. The trader should sell their capitals in order to get profit and safe from ris of losing money because the coin's price is going to fall next.
Therefore, it give very clear view of market trend. The market trap can also be identified using the trix indicator. It sometime compared with the MACD indicator. The MACD is also very useful and important indicator which is use in the technical analysis by the traders to predict the market future effectively. But the trix matric consider more effective because it not just help the traders to determine the market trend but also provide a clear and smoothen view of the market. It provide smooth market data.
It react to the price very fastly, and help to determine the trend by following the price movement. The value of the trix indicaor is calculated by the three EMA which reduce the false signal and remove the noise. Thus it is consider more effective indicator for the traders.
This indicator produce the trading single by its movement above or below the zero line. When the line is moving downward direction and cross the zero line, the traders should exit from the market. When the line is moving upward and cross the zero line, the traders should enter into the market. So the traders get the best entry and exit spots.
This indicator is very simple to use. There is only one oscillating line. The representation of the trix indicator is very clear. There is no ambiguity and results are reliable. That's why even the beginners can use this indicator for their market analysis.
Question 2
Show how one can calculate the value of this indicator by giving a graphically justified example? how to configure it and is it advisable to change its default setting? (Screenshot required)
The calculation of the trix indicator is done by using the three EMAs. This indicator has a mathematical expression which is use to represent its calculation. The three EMAs are use in calculation for reducing the false signals and smoothening the market representation. It also reduce the noise which is generated by the fast and quick response and reaction toward the price changes. For this purpose, we use 3 EMAs.
- EMA = (weight x Cp ) + (Previous EMA) × (1 - weight)
- where CP= Closing price
AFter this calculation, we can calculate the 3 EMA usingt he following formulas.
- First EMA
EMA1= EMA ( p, N, 1)
EMA2= EMA (EMAx, N, p)
EMA3 = EMA ( EMAxx N, p)
N is the period under consideration and p is the current price.
After calculating the EMA3, we can calculate the Trix indicator
- TRIX =[EMA3 (price)- EMA3 (t-1) ]/[EMA3 (price-1)
To apply the Trix indicator, click on the indicator icon on the top manu bar. Write trix andclick on it
It will applied on your chart
Changing The Setting
The default setting of the indicator is what is set by the inventor of the indicator. So the default setting is consider best but one can change it if it is not suitable for their trading startegy. Mean if they have planned to do the long term trading or short term trading, they need to change the indicator parameters accordingly. To configure the Trix indicator setting, first go to the chart section from tradingview.com. Open chart of your own choice
After applying the trix indicator, we can change its setting . The setting of the trix indicator can be change by clicking on the setting icon. A new window will be appear. We can change the setting according to our trading strategy.
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First is the input tab where we can change the length of the period according to our trading strategy need.
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In the style tab, we can change the style. We can change the color od Trix line as well as zero line.
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At last there is the visibility tab.
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The trading setting are very from trader to trader according to their trading needs and strategies. So the trader can change the indicator parameters accordingly. For short term traders, the short length of period will go best. For long term traders, long length of the period will be more suitable. So the parameter setting can be change according to the traders requirements. The default setting of the period for the trix indicator is 14-15 which is ideal for short term and medium term traders.
Question 3
Based on the use of the Trix indicator, how can one predict whether the trend will be bullish or bearish and determine the buy/sell points in the short term and show its limits in the medium and long term. (screenshot required)
Trix indicator is a technical mometum based indicator which is use to determine the price trend in the market. The Trix indicator has a single oscillating line which move around the zero line on the chart.. There is an indicator line which move up and down regarding the movement of the price. Another line around which the trix line is move is the Zero line. By analyzing the movement of trix line around the zero line, the traders can determine whether the market is in uptrend or downtrend.
- Downtrend/Bearish trend
When the trix indicator line cross the zero line while moving downward, it indicate that there is the downtrend in the market. This mean the market is falling and coin price is decreasing. This produce the bearish signals.
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When the trix indicator line cross the zero line while moving upward, it indicate that there is the uptrend in the market. This mean the market is rising and coin price is increasing. This produce the bullish signals.
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When the trix indicator line cross the zero line while moving downward, it indicate that there is the downtrend in the market. This mean the market is falling and coin price is decreasing. This produce the bearish signals. So the traders should sell their coins at the moment when the coin hit the zero line while trending downward. This is best selling spot. Because after this, coin will decrease more and trader will have lose.
When the trix indicator line cross the zero line while moving upward, it indicate that there is the uptrend in the market. This mean the market is rising and coin price is increasing. This produce the bullish signals. So the traders should buy their coins at the moment when the coin hit the zero line while trending upward. This is best buying spot. Because after this, coin will increase more and trader will have profit.
Trix Indicator on Short term Basis
Using the trix indicator for short term trading, the short time period interval should be use. the low timeframe will go best for the short and medium term trading plans. The trix indicator produce the trading signals when smoothened EMA calculation is reduced but when we use the short timeframe, more false signals are produced. SO the best time interval and period useful for the short and medium term traders is 14 to 15 period which is the by default setting.
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In the above screen short, multiple buying and selling signals are produced by the trix indiator with short period setting. This is best chance for the traders to increase their capital by utilizing these signals.
Trix Indicator on long term Basis
Using the trix indicator for long term trading, the long time period interval should be use. the high timeframe will go best and required for the long term trading plans. The trix indicator produce the trading signals when smoothened EMA calculation is reduced but when we use the long timeframe, more smooth, relevant signals are produced. SO the best time interval and period useful for the long term traders is 18 period
Question 4
By comparing the Trix indicator with the MACD indicator, show the usefulness of pairing it with the EMA indicator by highlighting the different signals of this combination. (screenshot required)
Trix indicator look like MACD indicator. The MACD and Trix both are the technical indicators which are use in the crypto world to analyze the market. The Trix indicator provide a clear and smooth representation of market structure. This reduce the noise by using the three EMA. It react to the price very fastly, and help to determine the trend by following the price movement. The value of the trix indicaor is calculated by the three EMA which reduce the false signal and remove the noise. Thus it is consider more effective indicator for the traders.
This indicator produce the trading single by its movement above or below the zero line. When the line is moving downward direction and cross the zero line, the traders should exit from the market. When the line is moving upward and cross the zero line, the traders should enter into the market. So the traders get the best entry and exit spots.
Let compare the Trix with MACD.
In the following chart, we have add the trx indicator and MACD indicator. The Trix indicator have the MA with 9 length. This is by default setting of Trix. The MACD's setting is also not been change. This is also have the by default setting.
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Now we can see that both indicators are moving up or down following the price. But the Trix indicator is looking more smooth and noise free. Most relevent and clear signals are being produced by the trix indicator. While the MACD is looking noisy. There are a lot of signals produced through the MACD indicator. That's why we can say that trix indicator givesmore good, smooth and clear signals.
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5. Interpret how the combination of zero line cutoff and divergences makes Trix operationally very strong.(screenshot required)
There is an indicator line which move up and down regarding the movement of the price. Another line around which the trix line is move is the Zero line. By analyzing the movement of trix line around the zero line, the traders can determine whether the market is in uptrend or downtrend.
When the trix line cross the zero line while moving upward direction, this indicate that there is bullish trend. This produce the buy signals. Traders should enter into the market to get the good profit. When the trix line cross the zero line while moving downward, it indicate that there is downtrend. But these statements are strong only if the support and resistance level support them at the same time. The next thing is divergence. There are two type of divergence. If the divergence signal find with these signals, it will become the confluence.
In the below screen short, the coin was rising up. There was the uptrend in the market. The price was rising up while creating the higher high and high low moves. But at a point, the price was showing the high move but the bearish signals were produced at the same time from the divergence. The divergence produced the bearish signal while the price on chart produce bullish signals. This is the bearish divergence. This indicate that price is going to fall next. We can see that after this signal, the coin started decreasing and bearish trend actually started. SO the divergence give us earlier signals so that we can take the trading signals before the trend actually start.
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In the below screen short, the coin was falling down. There was the downtrend in the market. The price was decreasing while creating the lower low and lower high moves. But at a point, the price was showing the low move but the bullish signals were produced at the same time from the divergence. The divergence produced the bullish signal while the price on chart produce bearish signals. This is the bullish divergence. This indicate that price is going to rise next. We can see that after this signal, the coin started increasing and bullish trend actually started. SO the divergence give us earlier signals so that we can take the trading signals before the trend actually start.
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6. Is it necessary to pair another indicator for this indicator to work better as a filter and help eliminate false signals? Give an example (indicator) to support your answer. (screenshot required)
The trix indicator is very good and useful indicator. it give very clear view of market trend. The market trap can also be identified using the trix indicator. It react to the price very fastly, and help to determine the trend by following the price movement. The value of the trix indicaor is calculated by the three EMA which reduce the false signal and remove the noise. Thus it is consider more effective indicator for the traders.
This indicator is very simple to use. There is only one oscillating line. The representation of the trix indicator is very clear. There is no ambiguity and results are reliable. That's why even the beginners can use this indicator for their market analysis. But as we know that no indicator is 100% accurate. There is the week point of all the indicators. The trix indicator also sometime produce the false signals. That's why we should use the trix indicator while combining with other indicators.
In the below chart, I have combined the MA(20,100) along with the trix indicator. The trix indicator have the by default setting. We have not change its setting.
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In the above screen short, we can see that the trix indicator have cross the zero line while moving upward. This produce the buy signals. We should place the buy order and should enter into the market. But first we need to confirm the buy signals. We then look at the MA indicator. The MA 20 has crossed the MA 100 while moving in upward direction. This indicate that price is rising. This produce the bullish trend signals. Now both indicators have confirmed the buy signals. Now we can place the buy order confidently.
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In the above screen short, we can see that the trix indicator have cross the zero line while moving downward. This produce the sell signals. We should place the sell order and should exit from the market. But first we need to confirm the buy signals. We then look at the MA indicator. The MA 20 has crossed the MA 100 while moving in downward direction. This indicate that price is falling. This produce the bearish trend signals. Now both indicators have confirmed the sell signals. Now we can place the sell order confide
Question 7 - List the pros and cons of the Trix indicator
Advantages of Trix Indicator
The Trix indicator is very simple to use. There is one oscillating line which move up or below while following the price movement closely. This is very easy to understand.
The trix indicator is very useful for determining the market trend.
Trix indicator produce the buying and selling signals.
When the trix line cross the zero line while moving upward direction, this indicate that there is bullish trend. This produce the buy signals. Traders should enter into the market to get the good profit.
When the trix line cross the zero line while moving downward, it indicate that there is downtrend. The trader should sell their capitals in order to get profit and safe from ris of losing money because the coin's price is going to fall next.
This indicator also useful in case of the bullish and bearish divergence. It produce the bearish and bullish divergence signals which increase its effectiveness.
This indicator reduce the false signals.
The Trix indicator remove noise and provide a smooth a clear market view.
Disadvantages of Trix indicator.
This is useful only in trending markets. When the market is moving in ranging zone, we cannot use the Trix indicator.
The Trix indicator cannot work effectively when use it alone. We have to combine it with some other indicator in order to get more accurate results.
The smoothing function which is applied on the trix indicator to provide the smoothness in the output sometime produce the false signals.
Changing the time setting/ period setting especially in short term trading, effect the market structure hugely. The traders may get quite different view of market while setting the peiod on short length.
Conclusion
Trix indicator is a technical mometum based indicator which is use to determine the price trend in the market. The traders use it in their technical analysis to analyze the market trend and then can decide their future moves in the market. The trix indicator is very useful for determining the market trend. Trix indicator produce the buying and selling signals.
This indicator also useful in case of the bullish and bearish divergence. It produce the bearish and bullish divergence signals which increase its effectiveness. This indicator reduce the false signals. The Trix indicator remove noise and provide a smooth a clear market view
But, This is useful only in trending markets. When the market is moving in ranging zone, we cannot use the Trix indicator. The Trix indicator cannot work effectively when use it alone. We have to combine it with some other indicator in order to get more accurate results.