Full Review of the TRIX Indicator for Binary Options
The TRIX is a momentum oscillator used by commodity, forex and options traders to generate trend following signals. It is also a useful tool for binary options traders when used as intended. One of advantage of the TRIX is its calculation which incorporates multiple moving averages with a rate of change. The result is an indicator with trend and momentum determining capabilities. The TRIX indicator provides trend following entry signals, predicts tops and confirms support. Although it can be used as a strategy the TRIX is best employed as a tool in a larger strategy. Failure to recognize support, resistance and other potential turning points can lead to false signals, whipsaws and losses.
What Is The TRIX Indicator?
There are quite a few technical indicators available to binary options traders. Some are useful and reliable, others are not. The TRIX indicator is one of the former but what is it? This indicator was developed by technical analyst and financial writer Jack Hutson during the 1980’s. He was an editor for Technical Analysis Of Stocks And Commodities and sought a way to filter out small and insignificant market movements without missing out on the really important signals. The TRIX is a momentum oscillator that can be read in a manner similar to MACD. It uses a triple smoothed EMA to display a graph of the %ROC. Like MACD the TRIX generates three basic types of signals; signal line crossovers, over bought/oversold and divergences.
The TRIX indicator is a standard indicator on most chart packages like MT 4, MetaStock and OptionsXpress.
How Do Binary Options Traders Use The TRIX?
Exactly the same way as any other trader and exactly the same way as you would MACD. The difference is the TRIX is displayed as an oscillator and not as a histogram. Never the less the indicator is still very easy to read. I suggest using it along with trend determining technique and in multiple time frames. When a TRIX signal appears on a long term chart move down to a shorter term chart and simply wait for a signal there.
The signals themselves are straightforward and easy to read. The zero line crossover and signal line crossovers are trend following. Once trend is established these signals can be taken in line with the underlying trend with a reasonable amount of success. Overbought and oversold levels can also be used to give signals. These signals are also best used in line with the underlying trend. When the signal line moves below 0 in an uptrend or above 0 in a downtrend and then points back in the direction of the underlying trend it generates a signal. The last primary signal generated by the TRIX are divergences. Divergences occur when a trending market makes a new high or low and the TRIX makes a lower high or low. This is just like MACD, RSI and other oscillators. Divergences signal weakness in the market and point to a potential reversal.
Why The TRIX Indicator Does Not Suck
The TRIX does not suck. It is a good, reliable and easy to use indicator that can be applied in multiple time frames. The reason it is so reliable is the way it is calculated and read. The TRIX uses a triple smoothed EMA based on percent changes in the underlying asset. This calculation combines the trend indicating properties of a moving average as well as the momentum indicating properties of an ROC type oscillator. By applying this indicator to your charts to identify long, intermediate and near term trends binary options traders can generate signals for 60 second, one hour, end of day, one week and monthly expiry’s.
Why the TRIX Indicator Sucks
The TRIX sucks because it is a tool and not a strategy. By itself the TRIX will generate some false signals and it does not take into account market conditions or support/resistance. Blindly following these signals will generate plenty of wins but will also generate losses. In order to weed out some of those false signals and take better advantage of the good signals other trend following and support/resistance indicating devices should be used.
My Last Words On The TRIX – Useful Tool for Beginners
The TRIX is a useful tool and one I think well suited to beginner traders. The tools utilizes momentum and trend,displays in an oscillator and provides three different types of signals. It is easy to read and easy to follow, useful in multiple time frames and adaptable to individual markets. This tool is like having two tools in one. A beginner starting out with this tool gains an advantage because he or she will only need to focus on one indicator. More experienced traders can gain an advantage as well by clearing out the clutter of two indicators and replacing them with one. I like the TRIX and can see it fitting in well with trend line, Fibonacci, Bollinger Band and support/resistance trading strategies.
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