The TRIX indicator is a momentum oscillator that shows the percentage rate of change of a triple-smoothed exponential moving average. It was developed by Jack Hutson in the 1980s and is known for filtering out insignificant price movements, making it excellent for identifying meaningful trends.
What is the TRIX Indicator?
TRIX stands for Triple Exponential Average. It applies exponential smoothing three times to price data, then calculates the percentage change. This triple smoothing eliminates short-term cycles and noise that can distract traders from the real trend.
The key benefit: TRIX filters out price movements that are too short to be significant. This means fewer false signals and cleaner trends compared to simpler indicators like RSI or standard moving averages.
How TRIX is Calculated
The calculation involves four steps:
- Calculate a single EMA of closing prices (EMA1)
- Calculate an EMA of EMA1 (EMA2)
- Calculate an EMA of EMA2 (EMA3)
- Calculate the percentage change of EMA3
TRIX Formula
EMA1 = EMA of Close (n periods)
EMA2 = EMA of EMA1 (n periods)
EMA3 = EMA of EMA2 (n periods)
TRIX = ((EMA3 today - EMA3 yesterday) / EMA3 yesterday) x 100
Reading the TRIX Indicator
The Zero Line
The most important reference point is the zero line:
- TRIX above zero: The triple-smoothed average is rising (bullish)
- TRIX below zero: The triple-smoothed average is falling (bearish)
- TRIX crossing zero: Potential trend change
Signal Line
Many traders add a signal line (usually a 9-period EMA of TRIX) for additional signals:
- TRIX crosses above signal line: Bullish signal
- TRIX crosses below signal line: Bearish signal
TRIX Trading Strategies
Strategy 1: Zero Line Crossover
The simplest approach uses zero line crossovers:
- Buy when TRIX crosses above zero
- Sell when TRIX crosses below zero
- Use a trailing stop to protect profits
Zero Line Example
Stock XYZ has been declining with TRIX below zero for weeks:
- TRIX rises from -0.15 to -0.05 over several days
- TRIX crosses above zero, indicating the downtrend may be ending
- A trader enters long with a stop below recent swing low
- TRIX continues rising, confirming the new uptrend
Strategy 2: Signal Line Crossover
Using the signal line provides earlier entries:
- Add a 9-period EMA of TRIX as the signal line
- Buy when TRIX crosses above its signal line
- Sell when TRIX crosses below its signal line
Strategy 3: Divergence Trading
TRIX divergence can signal trend reversals:
- Bullish divergence: Price makes lower low, TRIX makes higher low
- Bearish divergence: Price makes higher high, TRIX makes lower high
Comparing TRIX to Other Indicators
TRIX vs MACD
TRIX and MACD are similar but have key differences:
- TRIX uses triple smoothing; MACD uses double smoothing
- TRIX shows percentage change; MACD shows absolute difference
- TRIX is smoother and generates fewer signals
- MACD responds faster to price changes
TRIX vs RSI
While both are momentum indicators:
- TRIX oscillates around zero; RSI oscillates between 0-100
- TRIX measures trend direction; RSI measures overbought/oversold
- TRIX is better for trend following; RSI is better for mean reversion
Optimizing TRIX Settings
The default period is typically 15, but you can adjust based on your trading style:
- 9 periods: More sensitive, faster signals, more noise
- 15 periods: Balanced approach (default)
- 21 periods: Smoother, fewer false signals, slower to react
Timeframe Considerations
- Daily charts: 15-period TRIX works well for swing trading
- Weekly charts: 12-period TRIX for position trading
- Hourly charts: 18-21 period TRIX for day trading
Advantages of TRIX
- Noise reduction: Triple smoothing eliminates insignificant moves
- Leading indicator: Can signal turns before they complete
- Clear signals: Zero line provides unambiguous reference
- Divergence detection: Excellent for spotting hidden divergences
Limitations of TRIX
- Lag: Triple smoothing creates more lag than simpler indicators
- Missed moves: Can be late to quick, sharp price movements
- Ranging markets: Generates whipsaws during consolidation
Practical Tips for TRIX Trading
1. Combine with Price Action
Use TRIX signals in conjunction with support/resistance levels and candlestick patterns for higher probability trades.
2. Filter with Trend
In uptrends, focus on bullish TRIX signals. In downtrends, focus on bearish signals. This alignment improves win rates.
3. Use Multiple Timeframes
Check TRIX on a higher timeframe first. Only take signals on your trading timeframe when they align with the larger trend.
Track Your TRIX-Based Trades
Pro Trader Dashboard lets you analyze which indicator strategies work best for you. Track your TRIX trades and see your actual performance data.
Summary
The TRIX indicator is a powerful tool for trend traders who want to filter out noise and focus on significant price movements. Its triple smoothing provides cleaner signals than most oscillators, though at the cost of some lag. Use it for trend identification, divergence trading, and confirming entries in the direction of the larger trend.
Continue learning about momentum indicators with our KST Indicator Guide or explore the Ultimate Oscillator.