What Is The Trend Intensity Index & How To Trade With It

The Trend Intensity Index (TII) is a technical indicator used to measure the strength of trend of a financial trading instrument in order to gauge future price trend development.  The Trend Intensity Index is based on an article by M. H. Pee that was available in the June 2002 issue of Stocks and Commodities Magazine.

What is the Trend Intensity Index?

The Trend Intensity Index ranges between 0 and 100. If the indicator shows a value beyond 50.0, it is considered as bullish trend. Conversely, if the value of indicator is below the 50.0 mark, it is taken as a bearish trend. The distance from 50.0 mark also determines the strength of a trend. Like, if the TII value is near 80, it means that the trend is strongly bullish. Similarly, if the TII value is near 20.0 then it is considered strongly bearish trend.

The 20.0 and 80.0 levels hold importance as well. The bullish entry is valid when the TII value reaches 80 or above while the bearish entry is valid when the TII value reaches 20 or below it.

trend intensity index on chart
trend intensity index on chart

Trend Intensity Index (TII) calculation

The SMA (60-period) is first calculated and the resultant is divided by 60. Then the deviation of the past 30 closing prices are estimated in the last 60 periods. If the close price is above the SMA, then the deviation is up. The up deviations can be calculated by subtracting the SMA from close price. Similarly, down deviation can be calculated by subtracting the close price from SMA.

The 30-period Trend Intensity index is calculated as follows:

TII = (SD+) / ((SD+) + (SD-)) x 100, where

  • SD+ equals the sum of up deviations of the recent 30 days
  • SD- equals the sum of down deviations of the recent 30 days

How to use the Trend Intensity Index indicator?

The Trend Intensity Index is not a default indicator in the Metatrader platform. Therefore, you have to download and install in your trading platform. The default setting of the indicator is “Close”. However, you can set it to open, high or low as well. You can use the indicator on any timeframe and on any currency pair or other trading instrument including stocks, commodities, indices and cryptocurrencies.

TII crossover

There are two lines in the indicator window; one is signal line and the other is TII line. If the signal line crosses the TII line from above, then a long signal is generated. Similarly, if the signal line crosses the TII line from below, a short signal is generated.

trend intensity index crossover
trend intensity index crossover

TII 50.0 level

You can use the TII indicator to trade with it’s 50.0 level. Simply, add the level 50.0 and go long when the TII line crosses the 50.0 level to the upside. Similarly, go for short entry when the 50.0 level is crossed by the TII line to the downside.

trend intensity index level 50.0
trend intensity index level 50.0

Trend Intensity Index trading strategy

The TII indicator can be used as standalone indicator in the trading but in this TTI trading strategy example we will include the SMA-50 with it to further help us filter the false signals.

Trend Intensity Index buy strategy

  • The signal line should cross the TII line from above.
  • The TII value should be near 20.
  • The price should be above the SMA-50.
  • Wait for the green arrow to appear before entry.
  • The stop-loss can be placed near swing low.
  • The take-profit can be at least the same size as stop-loss.
trend intensity index buy setup
trend intensity index buy setup

Trend Intensity Index sell strategy

  • The signal line should cross the TII line from below.
  • The TII value should be near 80.
  • The price should be below the SMA-50.
  • Wai for the red arrow to appear before entry.
  • The stop-loss can be placed near swing high.
  • The take-profit can be at least the same size as stop-loss.
trend intensity index sell setup
trend intensity index sell setup

Trend Intensity Index conclusion

Like any other oscillator, the Trend Intensity Index ranges from 0 to 100. If the indicator value is beyond 50.0, it shows a bullish trend while if the TII value is below 50.0, it is a bearish trend. The indicator value near 100 is taken is strongly bullish while the value near 0 is taken as strongly bearish.

The trend intensity index indicator can be used on your trading platform charts to help filter potential trading signals as part of an overall trading strategy.

I would prefer to use the majority of technical indicators such as the trend intensity index indicator on the 1-hour charts and above. I tend to find that these charts contain less market noise than the lower time frames and thus give more reliable signals for my forex trading strategies. This also means that I spend less time staring at charts and can also set alert notifications to let me know when price has reached certain levels or a particular indicator value has been reached.

The trend intensity index indicator is just one indicator amongst thousands. I would not build a trading system alone, but rather combine with other technical indicators such as moving averages, Parabolic SAR, Stochastic Oscillator, RSI, ADX and price action analysis.

Of course, every trading system will generate false signals which is why money management is so important. I would personally be implementing sensible money management and only take traders that give me a favorable risk to reward ratio, ideally of at least 1:3. This means that one losing trade does not wipe out consecutive winners.

The methods of implementing the trend intensity index indicator into a trading strategy that are outlined within this article are just ideas. I would always ensure that I have good money management, trading discipline and a trading plan when using any forex strategy.

Furthermore, I would combine multiple technical analysis, fundamental analysis, price action analysis and sentiment analysis to filter all entries. You should trade forex in a way that suits your own individual style, needs and goals.

If you would like to practice trading with the trend intensity index indicator, you can open an account with a forex broker and download a trading platform. If you are looking for a forex broker, you may wish to view my best forex brokers for some inspiration.

Happy trading!