The TVI indicator was developed by William Blau in 1995 and was described in detail in his book “Momentum, Direction and Divergence”. This oscillator is a very informative indicator, which enables determination of an entry point and trend direction as well as many other parameters. The main feature of this oscillator is that it is calculated on the basis of tick density instead of price.
TVI = 100 * ((DEMA(upticks) - DEMA(downticks))/( DEMA(upticks) + DEMA(downticks)))
The TVI indicator is a composite oscillator for determination of entry and exit points, trend direction, and overbought/oversold signals.
When there is a buoyant trend on the market and the TVI bar has changed the color from red to blue, it is time to buy an asset as the price may rise further within the overall bullish trend. A color change is a signal to enter the market.
If the market moves down and the TVI bar has changed to red color, it is a signal to sell an asset as the price can extend its decline. It is time to enter the market when the indicator changes the color.
The basic line of the indicator is the determinant of market trend. It travels through the peaks and bottoms of the histogram bars.
If the line crosses the zero level below, the overall trend reverses downwards. In case the basic line crosses the zero level above, the trend switches to bullish one.
The market trend is determined automatically. The direction is shown in the top-left corner of the indicator window (“up” or “down”) and suitable only for a chosen time frame.
If the right top of the histogram is below the left one, and the price is rising, there is a market divergence signaling a coming downward reversal. In case the right apex is above the left one and the price is falling, there is a convergence indicating an upward reversal coming soon.