Meet again with me Wahyu Nahrul on the other Steemit Crypto Academy homework. Today I will be working on homework given by one of our professors @kouba01.

The homework given by our professor this week is about Crypto Trading Using Trix Indicator.

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Okay, just get to the discussion. Happy Reading !!

Triple Exponential Average Indicator

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With a variety of indicators that have been created to date, we already know very well that each indicator always takes data from a market to show something for which the indicator was created. But there is an indicator where this indicator takes data from other indicators and processes the data into a value that will be displayed on this indicator, the indicator I mean is Triple Exponential Average Indicator.

Triple Exponential Average Indicator or what is often referred to as Trix Indicator is a technical indicator that is categorized as a momentum oscillator which is visualized by a line moving between the zero line which is the benchmark point of the momentum shown.

This indicator can show the exponential average price movement that has been smoothed 3 times so that it can eliminate the noise from very extreme cryptocurrency movements.

The Trix indicator was created by Jack K. Hutson in the 1980s, he is an editor who works for a magazine entitled "Technical Analysis of Stocks and Commodities. This indicator was first created to predict price movements in the stock market and also commodities such as gold, silver, coal, oil, etc.

Many people associate the Trix indicator with the MACD indicator because both have similarities in the form of visualization and also the data used. However, because the Trix indicator uses smoothed exponential average movement data this indicator has smoother movements when compared to MACD.

And also, the Trix indicator has a fairly slow movement compared to other indicators, this is very reasonable because the Trix indicator is an indicator that does not sensitive to movements in short-term periods let alone insignificant price movements.

How Trix Indicator Works

As I mentioned earlier that the Trix Indicator moves based on the exponential average price movement that has been smoothed three times. This indicator is used by this indicator as a filter for signals given by the movement of the candlestick on the chart, as we know that the movement of the candlestick is a movement that represents the movement of the actual transactions that occur in a cryptocurrency market, therefore the movement of the candlestick will tend to be very fast and very difficult to analyze.

By being visualized using a line moving between the 0 line which is the benchmark of the Trix Indicator, this indicator is able to provide an overbought and oversold signal like other momentum oscillator indicators. If the Trix Indicator line moves below the 0 lines, this indicates that the market is in an oversold condition, while if the Trix Indicator line moves above the 0 lines, this indicates that the market is in an overbought condition.

Then the Trix indicator is also an indicator that is able to eliminate the shortcomings of several Moving Average indicators such as what happened to the Simple Moving Average which often misses the moment of changing trend direction quite far, then the Trix Indicator can also reduce false signals that we often encounter on the Exponential Indicator. Moving Averages that usually trap traders.

In addition, the Trix Indicator can also work by showing the divergence that occurs between the movement of this indicator and the movement of the candlestick, if there is indeed a divergence, this can be a signal of a trend reversal that will occur in a market. This is very beneficial because we know that the divergence between the movement of indicators and candlesticks is a rare moment in a market.

Calculating the Value of the TRIX Indicator and How to Configure Them

Now I will show you how to calculate the value of the Trix indicator, as I explained earlier that this indicator uses data from the exponential average price movement that has been smoothed up to 3 times. Therefore, to get the value from the Trix Indicator, we must get the recommended exponential moving average value 3 times. The formula is as follows:

_{EMA1 Formula}

Where:

• Price = Current price.
• EMA1(i) = Current EMA value.

After that, the value of EMA1 will be smoothed again using the following equation:

_{EMA2 Formula}

The value of EMA2 will be smoothed once again using the following equation:

_{EMA3 Formula}

After finding the EMA3 value, then we can start looking for the Trix Indicator value with the following equation:

_{Trix Indicator Formula}

Using all these calculations we will get the results for the Trix Indicator values as shown in the chart below.

SOURCE: TradingView

Note: I'm sorry professor, I didn't show the real example about how to calculate the Trix Indicator value. But in the past few days, I've been looking for the correct data to be entered into the formula and tried it many times, but I didn't get the same value as shown by the Indicator on the chart.

How To Configure Trix Indicator

To configure the default settings of the Trix Indicator, we can do it very easily, but the first thing you have to do is insert the Trix Indicator into the chart as shown in the image below.

SOURCE: TradingView

After that, the thing we do is look for the settings button from the Trix Indicator. The Trix Indicator setting button is at the top of the Trix indicator.

This setting button is visualized using a gear-like icon as shown in the image on the left. After you see the icon then we just click on it.

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After that, a pop-up will appear containing the details of the settings for the Trix Indicator.

The first thing we can change is the "Style" setting. In this setting, we can easily change the appearance of the Trix Indicator displayed on the chart. We can change the color, line thickness, and the type of indicator displayed on the chart.

If you notice at the initial display of the Trix Indicator that I showed earlier, the Trix Indicator display is not very visible because the default color does not contrast and blends with the background color.

Therefore I will change it to orange color and I will also increase the line thickness of the Trix Indicator.

Next, we move on to the "Inputs" settings section, in this section, we can change the length of the Trix Indicator. If you follow the default settings, the length of the Trix indicator will use a length of 18, which means the Trix Indicator will show an exponential moving average for the last 18 days which has been smoothed 3 times.

However, if we want to change it according to our wishes then we can freely replace it with other numbers. We can change it by adjusting the trading style that we use, if we are a medium-term trader, we can use a long 18 or shorter like 14 and 15. But if we are the type of long-term investment, the length of 18 and above will be better. But don't use a number that is too high because it will make the Trix Indicator not sensitive at all to price movements

Please note that the Trix Indicator is not suitable to be used as an indicator in short-term trading, because the movement of this indicator is not as sensitive as the movement of other indicators. Therefore, if you are a short-term type, it is better if you use other indicators.

But if you are new to trading in cryptocurrencies, I advise you to use the predefined length as the default length of this Trix Indicator. Because the length is the length that has been determined by the indicator maker through various kinds of research, the length number is determined as the default length of the Trix Indicator.

After we finish changing the default settings of the Trix Indicator, then we can see the results as shown in the image below.

SOURCE: TradingView

We can see that the appearance of the Trix Indicator line is much clearer and easier to see so we will easily see the line movement of the Trix Indicator which we will use in trading later.

Predicting Trend Direction and Determining Buy/Sell Points in the Short Term along with Limits in the Medium and Long Term

Predicting the direction of the trend is very important for traders because the trend is something that will determine how the price of a cryptocurrency market will move. The Trix indicator which is an indicator that comes from the exponential average price movement can also be used as an indicator that predicts the direction of trends that occur in the market.

The Trix indicator will give signals to traders by showing the movement of the oscillator line, if the line moves downwards until it crosses the 0 line in the middle then this indicates that the trend in the market will be heading towards the Bearish Trend, whereas if the line is moving towards above until it crosses the 0 line in the middle, then this indicates that the trend in the market is going towards a Bullish Trend.

From these two moments, we can also determine which trading position we will enter when the line from the Trix Indicator crosses the 0 line. If the line crosses the 0 line towards the bottom then we can enter a short position or a short position, whereas if the line crosses the 0 line towards the top then we can enter with a sell position or a short position. For clarity, let's look at the example in the image below.

SOURCE: TradingView

In the chart above we can see the candlestick shows a pattern where the trend is bearish and this pattern is confirmed by the Trix Indicator with the oscillator line moving downwards until it breaks through the 0, at this point we can place a sell position to sell our assets because the trend in the market is moderate. in the Bearish Trend, or we can place a short position in futures trading.

Then the next candlestick forms a pattern where the price is increasing and the trend may have entered the Bullish Trend. Then the Trix Indicator confirms the signal by moving the oscillator line upwards until it breaks through the 0 line again, at this point, we can place a sell-buy position to buy the cryptocurrency because the trend in the market has entered the Bullish Trend.

After we saw the example above, we can see that the Trix Indicator can be used to predict the direction of the trend well. But this indicator has a weakness where it is not suitable for predicting the direction of the trend in the short term, this is because the Trix Indicator will filter out signals that do not experience significant changes in a short time so that it will often be late in predicting the direction of the existing trend. in the market.

Let's look at the example below.

SOURCE: TradingView

In the picture above in part 1, we can see that the trend in the market is bullish and the direction of the trend is confirmed by the Trix indicator by breaking the oscillator line with line 0 and heading upwards where at that point we can enter long positions.

Then in section 2, the candlestick begins to decline and the trend will enter the Bearish Trend, then the direction of the trend is also confirmed by the Trix Indicator by breaking the oscillator line with line 0 and heading down where at that point we can enter with a sell position.

In section 3 we saw that the candlestick is still experiencing a decline and the trend is still a Bearish Trend. However, Indiaktor Trix actually moves in the direction of the 0 line horizontally and does not give any signal of the direction of the trend at all even though the price in the market is experiencing a decline.

Here we can see how the Trix Indicator filters out too much information so it doesn't show any meaningful movement. This may be a good thing for medium-term and long-term trading, but for short-term trading, it will be detrimental to traders because short-term type traders will continue to try to make any profit in the short term.

Comparing the Trix Indicator with the EMA Line on the MACD Indicator Based on Signal Differences

In the earlier discussion, I also explained a little that many people say that the Trix Indicator is very similar to the MACD indicator and that is true because these two indicators both use moving average price data.

However, there is a fairly visible difference between these two indicators, we can see the difference by placing these two indicators together on the chart. And in order to compare it, we have to add a moving average line on the Trix indicator with a length that is adjusted to the MACD indicator.

In the example below, I used the Trix Indicator with a length of 15 and added a moving average line with a length of 9. Then I used the MACD Indicator with the default setting of 12,6,9 and the results we can see in the picture below.

SOURCE: TradingView

In the ADA/USD market chart above, with the addition of the previously mentioned Trix and MACD indicators, we can see that the direction of movement of the two tends to be the same. But if we look in more detail there is a difference between the two where the movement of the oscillator line of the Trix Indicator is smoother when compared to the rough line of the MACD Indicator.

This happens because the movement of the Trix Indicator is made by looking at the exponential average movement that has been smoothed 3 times so that the movement will not be as sensitive as the line movement of the MACD indicator.

Using Trix Indicator Accurately By Combining Zero Line Cutoff and Divergences

The dotted line in the middle of the Trix Indicator is a defining line that will make the Trix Indicator give signals in terms of trading. This line is at a value of 0 where if the oscillator line moves through the line there will be a signal to enter a trading position. The moment when the oscillator line moves through the 0 line is called "Zero Line Cutoff".

Then we can also get a divergence between the movement of the oscillator line and the movement of the candlestick, when there is a difference, we can indicate a trend reversal in the near future.

By combining these two things (Zero Line Cutoff and Divergence) we get the advantage to start trading at the most ideal price.

SOURCE: TradingView

In the example above, we can see that there is a divergence between the candlestick and the Trix indicator line. The candlestick is moving upwards as if the trend is in a Bullish Trend, but the movement of the Trix indicator line is moving in the opposite direction towards the bottom. From this, we can indicate that there will be a change in the direction of the trend from Bullish to Bearish in the near future.

After that, the oscillator line of the Trix Indicator finally crossed the 0 line until the Zero Line Cutoff occurred, this confirmed the divergence signal that had existed before and indeed the candlestick began to experience a price decline and the trend had turned into a Bearish Trend.

Filter Indicator To Pair With Trix Indicator

We all know that there is no single indicator that will give accurate signals, there are many incidents where indicators give false signals that often trap traders into losing trades, this also happened to Trix Indiakator

There are many ways to avoid these false signals, but the most effective way is to combine several indicators when trading. But we also have to understand that there are some indicators that are suitable to be paired and some are not, so we must be careful about this.

If we want to trade using the Trix Indicator, then there is an indicator that is very suitable to be paired with this indicator, namely "Aroon Indicator". The Aroon Indicator is able to act as a filter from the signals provided by the Trix Indicator and also the Aroon Indicator is able to provide more signals than the Trix Indicator which has a slow movement which is not suitable for trading in the short term.

For more details, let's look at the example below.

SOURCE: TradingView

In part 1 we can see that there is a price decline in the market so that the trend is bearish, and at the beginning of entering the bearish trend, the Aroon indicator gives a signal to sell our crypto, while the Trix indicator is late and only gives the signal when it is in the midst of a trend.

Then in the second part there is a trend reversal from Bearish to Bullish, here the Aroon Indicator gives a signal to buy while the Trix Indicator does not give any signal.

Then in section 3 there is a trend change again to Bearish and here the Aroon indicator once again gives the right signal to place a sell position. But here the Trix indicator failed in carrying out its duties, in this section it gives 2 signals that make traders confused where the first it gives a buy signal which is the delay in giving the signal in part 2 earlier. Then it also gives another signal to sell in the near term.

But after the Trix Indicator gave the sell signal, the trend in the market began to change direction to Bullish, so the Trix Indicator gave a signal to sell at the lowest price.

From this example, we can see that the Trix indicator really fails to take into account the movement of the trend in the market, especially in section 3 where it gives a signal to sell at the lowest price.

But here we also know that the Aroon Indicator really helps the Trix Indicator in signaling a change in the direction of the trend well and it also successfully acts as a filter for Trix Indicator signals.

Advantages and Disadvantages of The Trix Indicator

No single indicator is perfect, all indicators have their respective advantages and disadvantages so we must always be careful in trading using technical indicators.

Based on all my previous explanations, we can get some points regarding the advantages and disadvantages of Trix Indicator, including:

1. Advantages of Trix Indicator

• Gives Trend Reversal Signal

  The Trix indicator has proven to be capable of giving signals of a trend reversal that will occur in the market, we can easily get these signals by looking at the Zero Line Cutoff moment.

• Capable of Filtering Price Noise

  Noise is inevitable with cryptocurrencies, and the Trix Indicator does a good job of filtering out the noise.

• Suitable for use in medium and long term trading

  Because the Indicator is able to filter noise well, it is very suitable for use in relatively long trades, and with a 1-day timeframe.

• Simple Display

  The Trix indicator has a very simple appearance, it only uses 1 moving oscillator line and 1 benchmark line that is at 0.

• Capable of Giving Signals Through Divergence

  Divergence is a rare moment and the Trix Indicator is well able to provide a divergence between the price movement and the movement of the oscillator line.

2. Disadvantages of Trix Indicator

• Not Suitable For Short Term Trading

  Because the Trix Indicator eliminates noise very tightly, it is not suitable for short-term trading types that require an indicator to be sensitive to the price movements of a market.

• Slow Movement Indicator Line

  The movement of the lines of the Trix Indicator is also very sluggish so it often lags behind in showing a change in the direction of the trend.

• Not Suitable As A Single Indicator

  As in the previous example we can see that the Trix Indicator is not suitable to be used alone in making a trade, especially in short-term trades.

Last Word (Conclusion)

The Trix indicator is an indicator that is proven to be reliable in predicting the movement of the trend direction, especially for the long-term trend direction. Then this indicator can also give us a signal in determining a trading position before starting to enter into the trade. But we should also know that this indicator is not suitable for use in short-term trading which requires an indicator to be sensitive to price changes.

The divergence provided by this indicator is also very powerful in predicting a change in the direction of the trend in the market so that traders can get ready to enter a trade with the best position.

But I advise you not to use this indicator alone, we must combine it with other indicators in order to filter out false signals that may be given by the Trix Indicator.

Those are some of my explanations regarding Crypto Trading Using Trix Indicator, I apologize if there are still many mistakes that you can get when reading my explanation earlier, I would be very grateful if you told me in the comments column below.

Thank you for reading my blog, hope it will be useful for all of you. 😁

Note: All unsourced images are the author's property.