Traders Dynamic Index Trading Strategy – (Backtest, Rules, Setup, Performance)
Trading indicators generally work best when combined rather than being used individually. However, in this case, we will introduce an indicator designed to function as a comprehensive trading system on its own: Traders Dynamic Index trading strategy.
The Traders Dynamic Index is an all-inclusive indicator primarily composed of the RSI and Bollinger Bands. This raises a question: Is it truly effective enough to be considered a complete trading system?
In this article, we will explore what the Traders Dynamic Index is, how to calculate it, and backtest a trading strategy using it.
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What is the Traders Dynamic Index?
The Traders Dynamic Index (TDI) is a technical indicator employed by traders and investors to assess market conditions and anticipate price shifts. It is a momentum and trend indicator whose main component is the RSI. It was developed by Dean Malone, who devised a versatile indicator in the TDI that suits different timeframes and market situations. Some call this indicator Dynamic RSI.
How to calculate the Traders Dynamic Index?
The TDI indicator incorporates the standard RSI indicator, which gauges the strength of the current trend. Additionally, it utilizes two moving averages of the RSI: a fast one and a slow one, along with Bollinger Bands to assess the oscillators’ magnitude.
To calculate it, we begin by computing the 13-day RSI and its corresponding two simple moving averages: a fast-moving average spanning 2 days and a slow-moving average spanning 7 days.
Subsequently, we proceed to calculate the 34-day Bollinger Bands of the RSI. For both the upper and lower bands, we add 1.6185 standard deviations. And that essentially encompasses the process.
All the time frames are as recomme