The Triple Exponential Moving Average (TRIX) is an oscillator used to identify oversold and overbought markets as well as a momentum indicator. For use as an oscillator look for a positive value to indicate an overbought market and a negative value indicate an oversold market. When TRIX is used as a momentum indicator, a positive value suggests increasing momentum just as a negative value suggests momentum is decreasing. Some believe that the TRIX crossing above the zero line is a buy signal and a closing below the zero line is a sell signal. Divergence between price and TRIX can also indicate significant turning points in the market.
Two advantages of TRIX over other trend indicators is its filtration of market noise and a tendency to be a leading rather than a lagging indicator. By using triple exponential smoothing, "insignificant" cycles are filtered out. It can lead a market because it measures the difference between each bar's smoothed version of the price information. When used as a leading indicator, TRIX is best used in conjunction with another market-timing indicator so as to reduce false signals.
To calculate TRIX, an exponential moving average of the data is taken for the given period. Then, an exponential moving average is taken of that result for the same period, followed by another for the second result. The percent change in value of the third moving average is then returned as the value of the TRIX.
The value of the TRIX at the beginning of a data series is considered to be zero. Since it uses exponential moving averages, its initial values will include the zero value in its calculation. You may want to ignore values before three times the period has completed.