True Strength Index Divergence Indicator

True Strength Index Divergence Indicator  Generation III is modern indicator with complex mathematic algorithm (BJF Trading Group innovation). You will see divergenses on the chart and indicator. Arrows painted above/below the open bar and not in the past. You can see when actually you can trade. It is never to late! Signals based on closed bars so the arrows above/below open bar never disappear.

True Strength Index  Divergence Indicator - Short explanation

Indicator True Strength Index Divergence  indicates fractal divergence by True Strength Index indicator.When divergence appears between True Strength Index and the price, it indicates a high probability that the current trend will finish soon. A signal to buy is when a new Low-fractal is formed below the previous one and a corresponding True Strength Index value is higher than the previous one. A signal to sell is when a new Up-fractal is formed above the previous one and a corresponding True Strength Index value is lower than the previous value. The indicator TSI has a lot of customizable settings.

True Strength Index Indicator - Short Explanation

Calculations

The TSI is a "double smoothed" indicator; meaning that a moving average applied to the data (daily momentum in this case) is smoothed again by a second moving average. The calculation for TSI uses exponential moving averages. The formula for the TSI is:

where
c0 = today's closing price
m = c0 − c1 = momentum (difference between today's and yesterday's close)
EMA(m,n) = exponential moving average of m over n periods, that is,

r = EMA smoothing period for momentum, typically 25
s = EMA smoothing period for smoothed momentum, typically 13