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In this video, an advanced trading indicator called the Traders Dynamic Index (TDI) is demonstrated. The TDI combines various indicators to assess market sentiment, trend, and volatility, and can be optimized for different trading strategies. The video also shows how to read the TDI to enter into positions and how to manage risk through stop loss and take profit levels.
How to Use the TDI Indicator for Profitable Trading
Introduction to the TDI Indicator
The Traders Dynamic Index (TDI) is an advanced trading indicator that combines multiple indicators to assess the market state, sentiment and trend, and identify profitable signals. Created by finance market veteran Dean Malone, the TDI indicator is relatively simple to understand despite its complex makeup. The indicator uses the Relative Strength Index (RSI) to measure the trend strength, moving averages to smooth out the lines, and Bollinger bands to determine market volatility. This article will detail how to use the TDI indicator for profitable trading.
Adding the Indicator to Your Chart
Head over to your indicator search tab and search for the TDI indicator. Select the Bromley-made TDI indicator and add it to your chart. The TDI indicator displays and combines multiple indicators, allowing you to read the market sentiment, volatility, and momentum simultaneously. The red line represents the RSI indicator, the green line is a simple moving average applied to the RSI, the orange line is the basis of the Bollinger bands, and the final two lines are the upper and lower Bollinger bands.
Optimizing TDI for Your Strategy
TDI indicators are calculated based on the RSI, meaning a longer RSI period leads to less frequent but longer-term signals and vice versa. The following settings are recommended for this strategy: change the RSI period to 13, the band length to 34, the fast MA length to 2, and the slow MA length to 7. Keep in mind that the indicator settings will affect the signals. In addition, adjust the style settings to make the lines more visible.
Enter into Profitable Positions with the TDI Indicator
There are several ways to use the TDI indicator to enter into profitable positions. The first method involves looking for a crossover of the orange middle line with the red RSI line. If the RSI line crosses above the orange line, it indicates a longer-term bullish bias, and it is a good idea to enter into a buy position. Conversely, if the RSI line crosses below the orange line, the market has switched to a longer-term downtrend, and it is a good idea to enter into a sell position. For shorter-term trends, look at the crossovers between the red RSI line and the green RSI moving average line.
Incorporating Bollinger Bands for Overbought and Oversold Zones
To incorporate both RSI and Bollinger Bands and dynamically look for overbought and oversold zones, look for times when the RSI spikes above or below the Bollinger bands. If the RSI crosses above the upper Bollinger band, the market is overbought, and it is time to sell. If it crosses below the lower Bollinger band, the market is oversold, and it is time to buy. While this method works well, there can still be false signals, so it is recommended to add two more indicators as part of the strategy.
Completing the TDI Indicator Strategy
Add two additional indicators to the chart to avoid false signals. The first is the Exponential Moving Average (EMA), with a length of 200 and the color white. The second is the Triple Exponential Moving Average (Teama), with a length of 200 and the color yellow. To enter into a buy position, you need the red RSI line to close below the lower Bollinger band line, the price action to touch or go below the Teama, and the price action to be above both the EMA and Teama. If the RSI indicator has already crossed above the upper Bollinger band, it is best to avoid entering into a position. Place a stop-loss at the recent swing low to manage risk.
Conclusion
The TDI indicator is an advanced trading indicator that combines multiple indicators to assess the market state, sentiment, and trend, and identify profitable signals. Understanding how to incorporate the RSI, Moving Averages, and Bollinger Bands into your strategy can help you enter into profitable positions. By adding additional indicators like EMA and Teama, you can avoid false signals and reduce risk.
