Trix (or TRIX) is a
technical analysis oscillator developed in the 1980s by Jack
Hutson, editor of Technical Analysis of Stocks and Commodities
magazine. It shows the slope (ie. derivative) of a
triple-smoothed exponential moving average. The name Trix is
from "triple exponential."
- 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.
Like any moving average, the triple EMA is just a smoothing of
price data and therefore is trend-following. A rising or
falling line is an uptrend or downtrend and Trix shows the
slope of that line, so it's positive for a steady uptrend,
negative for a downtrend, and a crossing through zero is a
trend-change, ie. a peak or trough in the underlying average.
The triple-smoothed EMA is very different from a plain EMA. In
a plain EMA the latest few days dominate and the EMA follows
recent prices quite closely; however, applying it three times
results in weightings spread much more broadly, and the
weights for the latest few days are in fact smaller than those
of days further past.
The coefficients are the triangle numbers, n(n+1)/2. In
theory, the sum is infinite, using all past data, but as f is
less than 1 the powers fn become smaller as the series
progresses, and they decrease faster than the coefficients
increase, so beyond a certain point the terms are negligible. |
