science

True strength index

True strength index is a science topic covered in the lgStudy science library. This page brings together a partial reference excerpt, illustrations, worked examples, real-world applications and a short study plan, so you can understand True strength index rather than just read about it. In short: The true strength index (TSI) is a technical indicator used in the analysis of financial markets that attempts to show both trend direction and overbought/oversold conditions. It was first published by William Blau in 1991.

Key takeaways

True strength index belongs to science; place it in that map before memorising details.
Learn the definition first, then one example that makes the definition concrete.
Connect True strength index to a quantity you can measure, compute or draw — that is where exam questions come from.
Reproduce the core statement of True strength index from memory before moving on to harder problems.

Reference excerpt

The true strength index (TSI) is a technical indicator used in the analysis of financial markets that attempts to show both trend direction and overbought/oversold conditions. It was first published by William Blau in 1991. The indicator uses moving averages of the underlying momentum of a financial instrument. Momentum is considered a leading indicator of price movements, and a moving average characteristically lags behind price. The TSI combines these characteristics to create an indication of price and direction more in sync with market turns than either momentum or moving average. The TSI is provided as part of the standard collection of indicators offered by various trading platforms.

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:

T S I ( m , r , s ) = 100 E M A ( E M A ( m , r ) , s ) E M A ( E M A ( | m | , r ) , s ) {\displaystyle TSI(m,r,s)=100{\frac {EMA(EMA(m,r),s)}{EMA(EMA(|m|,r),s)}}}

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,

E M A ( m 0 , n ) = 2 n + 1 [ m 0 − E M A ( m 1 , n ) ] + E M A ( m 1 , n ) {\displaystyle EMA(m_{0},n)={\frac {2}{n+1}}\left[m_{0}-EMA(m_{1},n)\right]+EMA(m_{1},n)}

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

Interpretation While the TSI output is bound between +100 and −100, most values fall between +25 and −25. Blau suggests interpreting these values as overbought and oversold levels, respectively, at which point a trader may anticipate a market turn. Trend direction is indicated by the slope of the TSI; a rising TSI suggests an up-trend in the market, and a falling TSI suggests a down-trend.

Worked examples

Example 1 — a first encounter with True strength index

Start with the simplest possible case. Write down what True strength index claims or describes in one sentence, then invent the smallest concrete situation in which that sentence is true. In science, the smallest case is usually a single object, a single equation or a single measurement. Check that every symbol or term in your sentence has a meaning in that case.

Example 2 — changing one variable

Take the situation from Example 1 and change exactly one quantity: double it, halve it, or set it to zero. Predict what should happen to True strength index before you calculate. Comparing your prediction with the result is the fastest way to find out whether you understand the idea or only the words.

Example 3 — an exam-style question

Typical questions about True strength index ask you to (a) state it precisely, (b) apply it to given data, and (c) explain a limitation. Practise writing all three answers in under five minutes; the third part is what separates a full-mark answer from an average one.

Applications of True strength index

In research: True strength index appears in science research whenever the underlying quantities have to be modelled precisely. Papers usually cite it as a starting assumption and then explore where it breaks down.
In technology and industry: Engineering practice reuses True strength index in design rules, simulations and safety margins. Knowing the idea lets you read a specification sheet and understand why the numbers look the way they do.
In the classroom: True strength index is common in secondary-school and first-year university syllabi. It links to neighbouring topics Technical indicators, so understanding it makes those chapters shorter.
In everyday life: Look for True strength index outside the textbook — in sport, cooking, traffic, electronics or the sky above you. An example you found yourself is remembered far longer than one you were given.

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How to study True strength index in 20 minutes

Read the reference excerpt below once, without taking notes.
Close the page and write down what True strength index means in your own words.
Compare your version with the excerpt and mark what you missed.
Work through the three examples above with pen and paper.
Explain True strength index out loud to somebody else — or to Teacher Smith in the lgStudy chat.

Frequently asked questions

What is True strength index in simple terms?

Why does True strength index matter?

Because it connects several science ideas at once: it gives you a definition you can apply, a quantity you can calculate, and a way to check whether a result is plausible.

How should I study True strength index?

Read the excerpt, restate it from memory, then work through the examples and applications listed on this page. The five-step study plan above takes about twenty minutes.

What does this page cover?

It gives you a compact reference excerpt plus original lgStudy explanations, examples, applications and study material on True strength index.