Stocks & Commodities V.

11:1 (11-18): SIDEBAR: TRUE STRENGTH INDEX

TRUE STRENGTH INDEX

The formula for the true strength index is

 E ( E ( Mtm)) 
TSI r ,s = 100 s r 
 E s ( E r ( Mtm )) 

where:
Mtm= one-day change in closing price
|Mtm| = absolute value of Mtm
Er = exponential smoothed moving average of r days
Es = exponential smoothed moving average of s days
Our spreadsheet version uses r =40 and s = 20 (sidebar Figure 2). Column C calculates the momentum
(Mtm), which is the one-day difference in closing price. The formula for cell C10 is:

= B10-B9
Column D is the absolute value of momentum, which is one step in the denominator of the formula. Cell
D10 is:

= ABS (B10-B9)
Column E is the first smoothing of column C using an EMA with a smoothing constant of 0.049. The
formula fo rcell E10 is:

= E9 + 0.049 (C10-E9)
Column F is the second smoothing using a smoothing constant of 0.095. The formula for F10 is:

=F9+0.095(E10-F9)
Column G is the first smoothing of column D (the absolut evalue of the momentum). The smoothing
costant is 0.49. The formula for cell G10 is:

= G9 + 0.049 (D10-G9)
Column H is the second smoothing and uses a smoothing constant of 0.095. The formula for H10 is:

= H9 + 0.095 (G10-H9)
Finally, theT SI is calculated in column I. The ratio is multiplied by 100 to aid in scaling the index.

=100 (F10/H10)

—Editor

Figures Copyright (c) Technical Analysis Inc. 1

Stocks & Commodities V. 11:1 (11-18): SIDEBAR: TRUE STRENGTH INDEX

SIDEBAR FIGURE 2

Figures Copyright (c) Technical Analysis Inc. 2