Testing the TRIX indicator

The Trix indicator was invented by Jack Hutson. If you put both the Trix and a classic exponential moving average on a chart you will see that the Trix is actually like the EMA but a lot smoother.  In chart studio we see how the Trix is calculated :

triple := ema(ema(ema(price, period), period), period);

If you see the formula it is clear why they also call it the triple exponential moving average. The Trix can be used as an oversold and overbought indicator or as a momentum indicator for trading the trend. I wouldn't advice to use this indicator as an overbought/oversold indicator but it has some potential as a momentum indicator. Definitely because it keeps you in the trend. So if you got long trends you get big profits because you are "riding" the trend till the end.

The classic way to trade the Trix is to buy when the Trix crosses the zero line upwards and sell when the Trix crosses the zero line downwards. See image below.

You can see on the above chart that this is not always the best spot to enter. It would be a lot better to enter when the Trix changes direction. Let try this theory with a strategy that permits to trade both ways. Lets see wich one would perform the best on the 1 hour chart and higher.

Below a strategy that allows you to test both trading styles.

strategy TRIX_strat;

/*written by ctlprogrammer*/
/*Warning for demonstration purpose only, no live trading please*/
/*you can freely copy the code but plz leave this header*/
/*http://ctltrading.blogspot.com*/

input period=12, lots = 1,trix_classic=TRUE;

begin

  integer currentbar;

  series trix;

  currentbar := back(close);

  if currentbar < 3*period then return;

  

  TRIX(close,period);

  trix:=trix.line;

 if trix_classic=true then

 begin

  if not long() and not short() then

    begin

    if trix[currentbar-1]<0 and trix[currentbar]>0 then buy(lots);

    if trix[currentbar-1]>0 and trix[currentbar]<0 then sell(lots);

    end;

  if long() and trix[currentbar]<0 then exitlong();

  if short() and trix[currentbar]>0 then exitshort();

 end;

  

 if trix_classic=false then

 begin 

  if not long() and not short() then

    begin

    if trix[currentbar-1]<=trix[currentbar] then buy(lots);

    if trix[currentbar-1]>=trix[currentbar] then sell(lots);

    end;

  if long() and trix[currentbar-1]>trix[currentbar] then exitlong();

  if short() and trix[currentbar-1]<trix[currentbar] then exitshort();

 end; 

 end.

test result, 1 hour chart EU , period from 1 jan 2011 until 10 jun 2011

classic Trix trading ==> profit factor 0,77 (37 trades)

not classic Trix trading ==> profit factor 0,96 (208 trades)

test result, 2 hour chart EU , period from 1 jan 2011 until 10 jun 2011

classic Trix trading ==> profit factor 1,93(20 trades)

not classic Trix trading ==> profit factor 1,19 (104 trades)

test result, 4 hour chart EU , period from 1 jan 2011 until 10 jun 2011

classic Trix trading ==> profit factor 2,95(9 trades)

not classic Trix trading ==> profit factor 1,35 (47 trades)

These small test results suggest that the Trix is best used on high timeframe. Both the profit factors of the classic and non classic trading styles are going up when the strategy is used on a higher time frames but the classic trading style beats the non classic trading style by far on the big time frames.