TRIX |

Introduction |

TRIX is a momentum indicator that displays the percent rate-of-change of a
triple exponentially smoothed moving average of a security's closing price. It
was developed in the early 1980's by Jack Hutson, an editor for *Technical
Analysis of Stocks and Commodities* magazine. Oscillating around a zero
line, TRIX is designed to filter out stock movements that are insignificant to
the larger trend of the stock. The user selects a number of periods (such as 15)
with which to create the moving average, and those cycles that are shorter than
that period are filtered out.

The TRIX is a leading indicator and can be used to anticipate turning points in
a trend through its divergence with the security price. Likewise, it is common
to plot a moving average with a smaller period (such as 9) and use it as a
"signal line" to anticipate where the TRIX is heading. TRIX line crossovers with
its "signal line" can be used as buy/sell signals as well.

Calculation |

To calculate TRIX, you must first pick a period with which to create an
exponential moving average of the closing prices. For a 15-day period:

1) Calculate the 15-day exponential moving average of the closing price

2) Calculate the 15-day exponential moving average of the moving average
calculated in step #1

3) Calculate the 15-day exponential moving average of the moving average
calculated in step #2

You now have triple exponentially smoothed the moving average of closing prices,
greatly reducing volatility.

4) Finally, calculate the 1-day percent change of the moving average calculated
in step #3

Use |

Since TRIX measures the rate-of-change of closing prices, a positive TRIX value
is interpreted as a steady rise in the closing price of a security. A positive
TRIX is thus akin to a positive trending price, allowing the indicator to act as
a buy signal whenever it crosses up above the zero line. Similarly, crossing
below the zero line suggests the price is tending to close down at the end of
each period, which can be a sell signal.

The "signal line" mentioned earlier is also a useful buy/sell indicator. Since
the signal line period is shorter, a cross above it suggests that recent stock
prices are closing much higher. A buy signal is triggered when TRIX crosses
above its signal line, and a sell signal is triggered when TRIX crosses below
its signal line. This method can generate false signals during sideways price
movements, so it works best when prices are trending. It is therefore wise to
use TRIX in tandem with other indicators for confirmation.

Example |

**Microsoft**

In the Microsoft example, three bullish crossovers
between the TRIX and its "signal line" were all followed by uptrends. These
crossovers represented ideal buy points, for they quickly anticipated an
increasing demand for the security.