What Is The TRIX Indicator & How To Trade With It

Trix Indicator Explained

The triple exponential average (TRIX) indicator was first presented in the 1980s by Jack Hutson, who worked as an editor for a magazine on technical analysis in the area of ​​stocks and commodities. The TRIX indicator is an oscillator that is primarily used to identify oversold and overbought market conditions whilst it can also be used as a momentum indicator. TRIX uses a triple smoothing to help filter out insignificant price movements, also known as “market noise”. A signal line can be applied to look for signal line crossovers whereas directional bias can be determined with absolute levels and bullish/bearish divergences can be used to identify possible price reversals. 

What is the TRIX indicator?

The TRIX is a triple smoothed average line known as the Triple Smoothing Exponential Moving Average or EMA. It can be used both as an oscillator, triple exponential smoothing oscillator, which fluctuates around its zero lines and as a momentum indicator. According to the nature of the moving averages, the TRIX is a smoothed indicator that filters out false signals. The TRIX indicator achieves the best results in clearly trending markets.

TRIX indicator on chart
TRIX indicator on chart

TRIX indicator settings

Standard settings for the use of the TRIX indicator in technical analysis are to be selected for the indicator itself for a period of 5 to 15 days with a 9-day trigger line. With this setting, however, the TRIX indicator’s course is very similar to the curve of the popular and widely used MACD indicator. You can adjust the TRIX settings according to your own trading strategy. Generally, the lower the periods, the more signals the indicator will generate.

TRIX indicator settings
TRIX indicator settings

How to use the TRIX indicator?

TRIX indicator as an oscillator

When used as an oscillator, the TRIX indicator can identify oversold and overbought markets. Values ​​beyond 0.2 and -0.2 are considered extremes. If the line returns from these extreme areas, a trading signal is generated.

TRIX indicator - oversold & overbought
TRIX indicator – oversold & overbought

TRIX indicator for momentum

The TRIX is a momentum indicator that can indicate an increasing or decreasing momentum. Crossing the zero line could be a buy or sell signal depending on the direction of movement. If the TRIX indicator crosses the signal line from bottom to top, it can be a buy signal. If the signal line is cut from top to bottom, this can be interpreted as a sell signal.

TRIX indicator - momentum
TRIX indicator – momentum

As with other momentum indicators, one should pay attention to divergences and convergences if trend lines in the indicator and price chart run in different directions or the same direction. This means that a trend is weakening and can turn.

TRIX indicator - bearish divergence
TRIX indicator – bearish divergence

A bullish divergence by the fact that the base security is in a downward trend and steadily lower lows occur in the course of the price. The TRIX indicator does not follow the price movement; rising lows occur. Accordingly, a bearish divergence occurs in the downward trend and behaves in exactly the opposite way.

TRIX indicator - bullish divergence
TRIX indicator – bullish divergence

TRIX indicator trading strategy

To increase trading efficiency, we supplement the TRIX indicator trading strategy with two moving averages with periods of 10 and 20. This is to help try and prevent the amount of false signals.

Of course, every trading system will generate false signals which is why money management is so important. I would personally be implementing sensible money management and only take traders that give me a favorable risk to reward ratio, ideally of at least 1:3. This means that one losing trade does not wipe out consecutive winners.

Trading on the TRIX + MA system is carried out as follows:

  • If the fast MA crosses the slow MA from the bottom up and the main TRIX line crosses the signal line in the same direction, a buy deal is opened.
  • If the fast MA crosses the slow MA from top to bottom and the main TRIX line crosses the signal line in the same direction, a sell deal is opened.
TRIX indicator - trading strategy
TRIX indicator – trading strategy

TRIX indicator conclusion

TRIX is an indicator that combines trends with momentum. The triple smoothed moving average covers the trend, while the 1-period percentage change measures momentum. The standard setting for the TRIX indicator is 15 for the triple smoothed EMA and 9 for the signal line.

I would prefer to use the majority of technical indicators such as the TRIX indicator on the 1-hour charts and above. I tend to find that these charts contain less market noise than the lower time frames and thus give more reliable signals for my forex trading strategies. This also means that I spend less time staring at charts and can also set alert notifications to let me know when price has reached certain levels or a particular indicator value has been reached.

The TRIX indicator is one of those on which I would not build a trading system alone, but rather combine with other technical indicators such as moving averages, Parabolic SAR, Stochastic Oscillator, RSI, ADX and price action analysis.

The methods of implementing the TRIX indicator into a trading strategy that are outlined within this article are just ideas. I would always ensure that I have good money management, trading discipline and a trading plan when using any forex strategy.

Furthermore, I would combine multiple technical analysis, fundamental analysis, price action analysis and sentiment analysis to filter all entries. You should trade forex in a way that suits your own individual style, needs and goals.

If you would like to practice trading with the TRIX indicator, you can open an account with a forex broker and download a trading platform. If you are looking for a forex broker, you may wish to view my best forex brokers for some inspiration.

Happy trading!