TDI stands for Traders Dynamic Index, which is a technical analysis indicator used by forex traders to identify trends and momentum in the market. The TDI combines various indicators, including moving averages, relative strength index (RSI), and Bollinger Bands, into a single chart to provide traders with a comprehensive view of the market.
The Traders Dynamic Index was developed by Dean Malone, a veteran forex trader, and founder of the CompassFX website, in 2004. The TDI is based on the concept of multiple time frames, which means that it takes into account the price action of different time periods to provide traders with a more accurate and reliable signal.
The TDI indicator consists of three lines: the red line represents the RSI, the green line represents a short-term moving average, and the yellow line represents a long-term moving average. The RSI line is used to identify overbought and oversold conditions, while the moving averages provide information about the direction and strength of the trend.
The TDI indicator also includes two bands, the upper and lower Bollinger Bands, which are used to identify the volatility of the market. When the market is volatile, the bands widen, and when it is less volatile, they narrow.
To use the TDI indicator in forex trading, traders typically look for the following signals:
1. Trend direction: Traders look for the direction of the yellow line to identify the trend in the market. If the yellow line is moving up, it indicates an uptrend, and if it is moving down, it indicates a downtrend.
2. Momentum: Traders look for the angle of the green line to identify the momentum in the market. If the green line is steep, it indicates strong momentum, and if it is flat, it indicates weak momentum.
3. Overbought/Oversold: Traders look for the RSI line to identify overbought and oversold conditions. If the RSI line is above 70, it indicates that the market is overbought, and if it is below 30, it indicates that the market is oversold.
4. Volatility: Traders look for the width of the Bollinger Bands to identify the level of volatility in the market. If the bands are wide, it indicates high volatility, and if they are narrow, it indicates low volatility.
Overall, the TDI indicator is a useful tool for forex traders to identify trends, momentum, and volatility in the market. However, like any other technical indicator, it is not perfect and should be used in conjunction with other indicators and analysis tools to make informed trading decisions.