Trend Strength Index on Gold

What it shows

A blue line held between -1 and +1, below the candles, with grey marks at 0.5, 0 and -0.5. It hugs +1 only while closes rise in a near-perfect staircase.

How Pravex works it out

1. Take the last 14 candles (Length) and number them 1, 2, 3 and so on, oldest first.
2. Take the Source price of each of those candles.
3. Work out the Pearson correlation between the price and the candle number.
4. The result is +1 when the prices climb along a perfectly straight line, -1 when they fall along one, and close to 0 when they wander with no order.
5. Take five invented closes of 10, 11, 12, 13 and 14: they sit on a straight rising line, so the reading is +1. Closes that zigzag with no direction give a value near 0.

Settings

Setting	Default	What changing it does
Length	14	How many candles are checked for a straight line. A shorter window turns quickly and often reaches the extremes; a longer one needs a longer clean move.
Source	Close	The price that is tested. Switching to hl2 tests the midpoint of each candle, so a late spike in the close matters less.

How traders read it

Above the 0.5 mark the closes of the window have mostly climbed in order; below -0.5 they have mostly fallen. The space between the two marks is best read as no clear trend, whatever price did in size.

The index measures order, not distance. A slow, steady drift of a tiny amount per candle can read +0.9, while a large rally that came in one jump reads lower, because the jump breaks the straight line.

A cross of the zero line means the window changed from mostly rising to mostly falling or the reverse. After a sharp turn the line needs several candles to follow, since the window still holds the old move.

When it misleads

It says how straight the move was, never how far it will go, and a perfect +1 can sit on a tiny drift. One large candle inside the window breaks the straight line and drags the reading toward 0 for the next 14 candles. Gold has no weekend candles, so a window that spans the Monday open joins Friday’s last candles to Monday’s first as if nothing happened in between.

Questions and answers

Is the Trend Strength Index the same as the True Strength Index?

No. The True Strength Index (TSI) smooths price changes with two EMAs and runs from -100 to +100. This one correlates price with candle number and runs from -1 to +1.

Is 0.5 on the Trend Strength Index a trend?

It is the edge of one. The closes are fairly well ordered along a rising line, but loosely, and the grey 0.5 mark is where Pravex draws the line for an orderly move.

How many candles should the Trend Strength Index check?

Pravex checks 14. Drop to 7 or so to catch a fresh move earlier, at the price of more swings to the extremes; raise it to 30 to ask gold for a longer clean run before the line commits.

Does a high reading mean a strong trend?

It means an orderly one. A steady crawl and a steady surge can both read near +1, so check the size of the move on the price chart too.

Related: Rank Correlation Index, Vortex Indicator, Choppiness Index, every indicator.