Looking At Momentum With TRIX by Ed Downs
The TRIX oscillator has unique properties that make it ideal for identifying direction of trend as well as cyclical entry points. Last month, Ed Downs showed us how various oscillators can be tuned to the personality of an individual stock through optimization. This month, he'll explain the use of a derivative technique using the TRIX oscillator.
If you smooth an exponential moving average (EMA) I of the closing price twice (taking the EMA of the
EMA of the EMA) and then plot the percentage change per period on the y-axis, you'll have one version of
the TRIX. The original TRIX is the one-day difference of the triple exponentially smoothed log of the
closing prices. This value is then multiplied by 10,000 to aid in plotting the line. The two different
methods will plot virtually identical curves.