LEARN TREND INTENSITY INDEX IN 3 MINUTES

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Some indicators have names that require three explanations and a small whiteboard. The Trend Intensity Index is refreshingly direct: it measures how strongly recent prices have stayed above or below a longer-term average.

This matters because price crossing a moving average once is not especially impressive. Markets cross moving averages all the time, sometimes with the commitment level of someone opening a fitness app in January and never using it again. A genuine trend should show persistence, not just one dramatic candle.

The Trend Intensity Index, abbreviated as TII, measures that persistence on a scale from 0 to 100. It helps traders determine whether bullish or bearish price deviations are dominating the market.

History And Core Concept

The Trend Intensity Index was developed by M. H. Pee and introduced in the June 2002 issue of Technical Analysis of Stocks & Commodities. The original article presented TII as a method for measuring trend direction and strength through price deviations from a moving average.

Pee’s standard configuration used:

• Moving Average Period = 60
• Deviation Window = 30

The indicator first calculates the current 60-period simple moving average. It then examines the most recent 30 closing prices and measures how far each one lies above or below that same average.

The original trading interpretation was trend-following: TII above 80 confirmed a strong bullish trend, while TII below 20 confirmed a strong bearish trend. The original article and implementation notes are preserved in the June 2002 Traders’ Tips archive.

TII does not merely count how many closes are above or below the moving average. It also measures the size of those deviations.

For example, three closes slightly above the average may contribute less bullish intensity than one close far above it. The indicator therefore combines:

• Frequency: How often price is above or below the average.
• Magnitude: How far price is above or below the average.
• Persistence: Whether the same side has dominated throughout the selected window.

A TII near 100 means positive deviations dominate almost all measured movement. A TII near 0 means negative deviations dominate. A reading near 50 means positive and negative deviations are approximately balanced.

Formula

First, calculate the current long-term simple moving average: MA = SMA(Close, N)

The traditional value of N is 60.

For each closing price in the most recent M periods, compare it with the current value of that moving average: Deviation(i) = Close(i) – Current MA

Separate the deviations:

• Positive Deviation(i) = Maximum(Deviation(i), 0)
• Negative Deviation(i) = Maximum(-Deviation(i), 0)

Add the positive and negative deviations over the selected window:

• SD+ = Sum of Positive Deviations over M periods
• SD- = Sum of Negative Deviations over M periods

The final calculation is: TII = 100 × SD+ / (SD+ + SD-)

The traditional value of M is 30.

A crucial detail is that Pee’s original calculation compares all recent closes with the current 60-period SMA, rather than comparing every historical close with its own historical moving-average value.

Simplified Example

Consider a simplified five-period deviation window. Suppose the recent closes have the following distances from the current moving average: +6, +4, +2, -1, -3

The positive and negative totals are:

• SD+ = 6 + 4 + 2 = 12
• SD- = 1 + 3 = 4

Therefore:

• TII = 100 × 12 / (12 + 4)
• TII = 75

A reading of 75 means 75% of the total absolute deviation comes from prices above the moving average. It does not mean price has risen 75%, nor does it mean the next candle has a 75% probability of rising.

How To Read It

TII uses three primary reference levels: 20, 50, and 80.

TII Above 50

A reading above 50 means positive deviations are larger than negative deviations. The market has a bullish trend bias.

A move from below 50 to above 50 may signal that price has begun spending more time or traveling farther above its long-term average. However, the first crossover can still be noisy in a range.

TII Below 50

A reading below 50 means negative deviations dominate. The market has a bearish trend bias.

A move below 50 shows that recent closes are collectively leaning beneath the moving average. It does not automatically confirm a strong downtrend unless the indicator continues toward the lower zone.

TII Above 80

A reading above 80 indicates strong bullish trend intensity. In Pee’s original framework, this was a trend-confirmation or long-entry condition.

This is different from the usual RSI interpretation. TII above 80 should not automatically be treated as an invitation to short. It may mean the uptrend is functioning exactly as a strong trend should.

TII Below 20

A reading below 20 indicates strong bearish trend intensity. The original approach treated this as a short-entry or bearish trend-confirmation condition.

It is not automatically a buy signal. Buying solely because TII is below 20 means standing in front of a confirmed downtrend and hoping it suddenly becomes polite.

TII Near 50

When TII fluctuates around 50, positive and negative deviations are balanced. The market may be ranging, transitioning, or producing an unreliable trend signal.

Repeated crossings around 50 are usually a warning to reduce reliance on directional trend entries.

TII Reversing From an Extreme

A decline from above 80 means bullish intensity is weakening. A rise from below 20 means bearish intensity is weakening.

Weakening is not the same as reversal. Traders should wait for price structure, support, resistance, or a 50-line cross before declaring that the trend has changed direction.

TII Is Not RSI

Both TII and RSI move between 0 and 100, but their calculations and meanings are different.

The same numerical reading can therefore produce opposite interpretations. An RSI above 80 may make a contrarian trader cautious, while a TII above 80 confirms that bullish deviations are dominating.

Classical Trading Rules 

Pee’s original framework used straightforward trend-following conditions:

• Long Signal: TII crosses above 80
• Short Signal: TII crosses below 20

The trade would normally be placed on the next bar after the signal was confirmed. Historical implementation notes also describe remaining in the position until an opposite signal appears.

This rule is simple but may produce large drawdowns or late exits in modern volatile markets. A more practical implementation can separate entry, management, and exit:

• Entry: TII confirms trend and price breaks structure

Management: Trail the stop behind price or ATR Exit: Price breaks structure, TII crosses 50, or the opposite signal appears

The indicator should confirm the trading environment. Risk management should control the trade.

Practical Long Setup

A higher-quality bullish setup may require:

1. Price is above the 200-period EMA.
2. Price breaks established resistance.
3. TII rises from below 50 to above 50.
4. TII continues toward 80 instead of immediately reversing.
5. Spot volume expands during the breakout.
6. Price holds the broken resistance on a close or retest.
7. Entry occurs after price confirmation.
8. The stop is placed below the breakout structure or calculated with ATR.

A conservative trader can wait for TII to cross above 80. An aggressive trader may enter after the 50-line cross and price breakout, accepting more false signals in exchange for an earlier entry.

After TII reaches 80, pullbacks that remain above 50 may provide continuation opportunities if the bullish price structure survives.

Practical Short Setup

A bearish setup reverses the logic:

1. Price is below the 200-period EMA.
2. Price breaks established support.
3. TII falls below 50.
4. TII continues toward 20.
5. Sell-side volume or open-interest participation expands.
6. Broken support becomes resistance.
7. Entry occurs after the breakdown is confirmed.
8. The stop is placed above the rebound structure or calculated with ATR.

A TII reading below 20 confirms strong bearish intensity. It does not guarantee that entering after a vertical decline offers good risk-to-reward. Location still matters.

If price is already far below support, waiting for a rebound may be more disciplined than chasing the breakdown.

Crypto Trading Example

Assume BTC has consolidated between $102,000 and $108,000 for several weeks. The daily TII fluctuates between 42 and 58, showing no persistent directional dominance.

BTC then closes above $108,000 with increasing spot volume. TII rises through 50 and reaches 67. Three sessions later, BTC holds above the breakout level and TII crosses 80.

A structured plan could be:

• Entry: Retest of $108,000 holds after TII crosses 80
• Stop: Below the confirmed breakout structure
• First Target: One risk unit above entry
• Second Target: Next weekly resistance
• Management: Trail below higher lows
• Exit Warning: TII falls below 50 and price breaks the latest higher low

The price breakout identifies the opportunity. TII confirms that recent closes are not merely producing one isolated spike but are creating sustained positive deviations from the longer-term average.

Divergence and Failure Signals

TII can also show disagreement between price and trend intensity.

A bearish divergence may occur when price forms a higher high while TII forms a lower high. Price has advanced, but the proportion of positive deviation is weakening.

A bullish divergence may occur when price forms a lower low while TII forms a higher low. Price has declined further, but negative deviation is no longer as dominant.

Another useful warning is a failed extreme:

• TII approaches 80 but turns down before crossing it.
• TII approaches 20 but turns upward before crossing it.
• Price attempts a breakout but quickly returns to the prior range.

These events suggest that the attempted trend did not develop enough intensity. They should be confirmed by price rather than traded as standalone reversal signals.

Parameter Selection

The original configuration is:

• Moving Average Period = 60
• Deviation Window = 30
• Price Source = Close
• Moving Average Type = SMA

The deviation window is traditionally half the moving-average period. Possible testing configurations include:

• Daily trend analysis: 60, 30
• Faster swing trading: 40, 20
• Slower position trading: 100, 50
• Four-hour crypto analysis: 60, 30 or 84, 42

These are testing candidates rather than guaranteed optimal settings.

Crypto trades seven days per week. Therefore, 60 daily crypto bars represent about two calendar months, while 60 traditional trading sessions represent approximately twelve weeks. Traders seeking a similar calendar horizon may test a longer crypto setting, such as 84,42.

Shorter parameters generate faster signals but cross 20, 50, and 80 more frequently. Longer parameters are more stable but confirm trends later.

Platform Differences

TII implementations can differ. Before comparing charts, verify the following:

1. Whether the moving average is SMA or another type.
2. Whether historical closes are compared with the current MA or their own historical MA values.
3. Whether deviations are summed by magnitude or merely counted.
4. Which price source is used.
5. How a zero denominator is handled.
6. Whether the displayed parameters are listed as MA period first or deviation period first.

The original formula uses deviation magnitudes and compares the recent closes with the current moving-average level. A version that counts bars or uses a rolling historical baseline may look similar but is not mathematically identical.

Best Combinations

TII works best with tools that identify structure, participation, and risk.

TII and Market Structure

Use support, resistance, and swing points to identify the important location. Use TII to confirm whether price movement away from that location is becoming persistent.

TII and Moving Averages

The long moving average used in the formula can also provide visual trend context. Price above a rising average supports bullish TII signals; price below a falling average supports bearish signals.

TII and Volume

TII uses price only. Expanding spot volume provides independent evidence that strong trend intensity is supported by wider participation.

TII and ATR

ATR helps determine stop distance and position size. A strong TII reading says nothing about how large a normal pullback may be.

TII and RAVI

RAVI identifies whether short- and long-term averages are separating. TII identifies whether recent deviations are predominantly above or below the reference average. Their information overlaps, so they should be treated as supporting observations rather than completely independent confirmations.

Common Mistakes

The first mistake is treating TII above 80 as overbought and automatically selling. In the original system, 80 confirms bullish trend intensity.

The second mistake is treating TII below 20 as an automatic bargain. It confirms strong bearish intensity rather than a completed bottom.

The third mistake is entering after a vertical move without evaluating location. Trend confirmation can arrive after the risk-to-reward ratio has deteriorated.

The fourth mistake is trading every 50-line crossover. Sideways markets can produce repeated false signals around the neutral level.

The fifth mistake is assuming falling TII guarantees a reversal. It shows weakening intensity, not necessarily a change in direction.

The sixth mistake is ignoring platform formula differences. A non-original calculation may produce different signals even with identical parameters.

The final mistake is holding a position until the opposite 80 or 20 signal without independent risk control. Modern crypto markets can produce substantial losses before a slow opposite signal appears.

Key Takeaways

The Trend Intensity Index is a bounded trend indicator developed by M. H. Pee. It measures how much of the recent total price deviation lies above or below a longer-term moving average.

Remember these practical principles:

• TII moves between 0 and 100.
• The original parameters are 60 periods for the SMA and 30 periods for deviations.
• Above 50 indicates bullish trend bias.
• Below 50 indicates bearish trend bias.
• Above 80 confirms strong bullish intensity.
• Below 20 confirms strong bearish intensity.
• The 80 and 20 levels are trend signals, not automatic reversal levels.
• TII measures both the frequency and magnitude of deviations.
• Weakening intensity does not automatically mean trend reversal.
• Price structure, volume, volatility, and risk management should confirm the signal.

TII is useful because it asks a better question than whether price crossed a moving average today. It asks whether recent prices have consistently and meaningfully stayed on one side of that average.