True strength Index (TSI) is a VTL momentum oscillator based on a double smoothing of price changes. Works like other oscillators, the true strength indicator is a variation of the relative strength index. The True Strength Index (TSI) is an extremely responsive momentum indicator with very little lag time in its representation of price movement momentum. It is designed so that when it is rising above zero, price is also rising. Also, when the indicator is falling below zero, price is also falling.
How to trade With TSI
The indicator crossing above/below zero line can be taken as trend changes. It can be used as an over bought over sold indicator. Leves of -50 and + 50 be taken as oversold over bought. Divergence can be used to enter trades. See the chart. At point 1 in chart TSI crosses above its zero line after a down trend and a new uptrend emerges. At point 2, TSI crosses below zero line and down trend emerges. Point 3 in chart shows a divergence at top, price makes a new highs while TSI fails to make new highs. This indicates momentum waining for the uptrend and trend reversal is imminent.