True Strength Index (TSI) in Indian Markets: A Worked Reliance Example

What the True Strength Index Actually Measures

The True Strength Index, written as TSI, answers one question. How strong and how clean is the current price momentum, after the random daily noise has been stripped out. William Blau designed it so that two layers of smoothing remove the jitter that makes a raw momentum line jump around. The result oscillates around a zero line. Above zero means buyers are in control of momentum, below zero means sellers are. Because the smoothing is heavy, a TSI reading is slow to flip, which is exactly why swing traders on the NSE like it on names such as Reliance, HDFC Bank, TCS and Infosys.

TSI is not the same as the Relative Strength Index. RSI measures the ratio of up moves to total moves over a fixed window and is bounded firmly between 0 and 100. TSI instead double smooths the actual size of each daily price change, so it can read very high in a strong trend and stay there. A TSI of +70 on a trending stock is normal and healthy. An RSI of 70 already screams overbought. Reading them as if they were the same scale is one of the most common beginner mistakes.

Because momentum and absolute momentum are both smoothed and then divided, TSI also tells you about the quality of a move. When a stock grinds higher with small steady gains and few red days, the TSI climbs to a high plateau and stays calm. When a stock lurches up and down even while drifting higher, the absolute momentum stays large, the ratio shrinks, and TSI sits closer to zero. That distinction between a clean trend and a messy one is the real edge the indicator gives an Indian intraday or swing trader.

The TSI Formula, Step by Step

TSI is built in four stages. First, take the daily price change, which is today close minus yesterday close. Second, smooth that change twice with exponential moving averages, the standard being a 25 period EMA followed by a 13 period EMA. This is called double smoothed momentum. Third, repeat the exact same double smoothing on the absolute value of the daily change, which gives double smoothed absolute momentum. Fourth, divide the first by the second and multiply by 100.

Note the ordering, because the original short version of this page had it backwards. The first and outer smoothing uses the longer 25 period EMA and the second smoothing uses the shorter 13 period EMA. Many platforms label these as long length 25 and short length 13, and a 7 or 13 period signal line is then layered on top of the TSI itself. If you flip the two lengths you still get a valid oscillator, but it will not match the readings on TradingView, Zerodha Kite or Investopedia, and your backtests will not be comparable.

A Real Worked Example on Reliance Industries

Numbers make this concrete. Take an illustrative run of daily closing prices for Reliance Industries (RELIANCE) on the NSE, climbing steadily from around 2,820 to 3,358 over roughly forty sessions. These levels are realistic for the stock and are used here only to show the mechanics. Each day we record the price change and its absolute value, then push both through the 25 then 13 double smoothing.

By the final session the double smoothed momentum settles near 14.1 and the double smoothed absolute momentum near 19.1. The TSI is therefore 100 times 14.1 divided by 19.1, which equals about +73.9. The number being positive confirms buyers own the momentum. The number being high tells you the climb has been clean, because most days were green and the up moves dominated the down moves.

Now read it like a trader. The TSI is above zero, so the trend bias is long. But +74 is far above the +25 band, so momentum is stretched and a fresh full size entry here carries poor reward to risk. The more useful signal is the tail. The last six readings drift down from 76.4 to 73.9 while price keeps making new highs. That gentle fade is an early bearish divergence, a warning that the up move is tiring even though it has not broken yet. A disciplined trader uses that to trail stops tighter, not to short blindly.

Turning the Signal Into Rupees on Reliance Cash and Futures

Suppose three weeks earlier the TSI on the same Reliance series crossed up through zero near a close of Rs 2,958, and you took the long. If you bought 100 shares in the cash segment and exited near Rs 3,300 once the TSI plateaued and started fading, the gross gain is (3,300 minus 2,958) times 100, which is Rs 34,200. Delivery STT is 0.1 percent on both buy and sell, roughly Rs 296 and Rs 330. Add a flat brokerage of about Rs 20 per side on most discount brokers, plus exchange charges and 18 percent GST on brokerage and transaction fees, and you are out of pocket roughly Rs 750 to Rs 800 in costs. Your net is close to Rs 33,400 before tax, illustrative only.

Reliance also has a liquid futures contract. The NSE lot size for Reliance futures is 250 shares at the time of writing, so always confirm the current lot on the NSE site because exchanges revise lots. A long futures position from 2,958 to 3,300 on one lot is (3,300 minus 2,958) times 250, which is Rs 85,500 gross. Futures STT is charged only on the sell side at 0.02 percent of turnover, so on a sell value of about 3,300 times 250 equals Rs 8,25,000, the STT is roughly Rs 165. Add brokerage, exchange transaction charges, stamp duty and 18 percent GST, and total costs are usually a few hundred rupees. The futures route magnifies both the gain and the risk because you only post margin, not the full contract value.

How Profits From This Trade Are Taxed in India

The two routes are taxed differently, and this changes your real take home. The cash delivery trade above is a capital gain. Held under twelve months it is short term capital gain, taxed at 20 percent after the July 2024 Budget change, up from the old 15 percent, plus 4 percent cess. Held over twelve months it is long term capital gain, taxed at 12.5 percent on gains above the Rs 1.25 lakh yearly exemption. So a short term net gain of about Rs 33,400 attracts roughly Rs 6,680 in tax plus cess, illustrative only.

The futures trade is different. Income from F and O is treated as business income, not capital gain. It is added to your other income and taxed at your slab rate, and you can deduct genuine trading expenses such as brokerage, internet, advisory fees and data subscriptions against it. There is no STCG or LTCG concept for F and O. If your total turnover is large enough, a tax audit under Section 44AB can apply. Always treat the figures here as illustrative and confirm your position with a qualified chartered accountant, because nobody can promise you a guaranteed return.

Reading TSI Signals Correctly

There are three signals worth using, in rising order of reliability. The weakest is the zero line cross, which simply tells you momentum has flipped from net selling to net buying or back. It is good for trend filtering but late for timing. The middle signal is the signal line cross, where the TSI crosses its own short EMA, much like an MACD trigger. This is your timing tool. The strongest, but rarest, is divergence, where price makes a new high or low but TSI does not, hinting the move is running out of fuel. The Reliance tail above, with price up but TSI fading from 76 to 74, is a textbook bearish divergence.

• Zero line cross up, momentum turns positive, treat as a trend filter and only take longs.
• Zero line cross down, momentum turns negative, stand aside or look for shorts on liquid F and O names.
• TSI crosses above its signal line in positive territory, a timing entry for an existing uptrend.
• TSI above +25 with price still rising, momentum is stretched, trail stops rather than add.
• Price new high but TSI lower high, bearish divergence, tighten risk or book partial profit.

Best TSI Settings for Indian Stocks and Indices

The Blau standard of 25 and 13 with a 13 period signal line is a sound default for daily charts of large caps like Reliance, HDFC Bank, TCS and Infosys. For faster, more volatile instruments, especially intraday Bank Nifty and Nifty futures, traders often shorten to 13 and 7 with a 5 period signal to react quicker, accepting a few more false signals in return. For weekly position trades, lengths of 40 and 20 strip out almost all noise and only flag major regime changes. Never copy a setting blind. Backtest it on the exact instrument and timeframe you trade.

One India specific point on intraday use. Weekly index option expiries fall on a fixed weekday and monthly stock derivatives expire on the last Thursday, and the sessions just before expiry get choppy as positions unwind. TSI smoothing helps here by ignoring single bar spikes, but no oscillator handles an expiry day gap well. Many disciplined traders simply size down or stand aside on expiry afternoons rather than trust any momentum signal through the unwind.

Combining TSI With Other Tools

TSI is a momentum lens, not a complete system. Pair it with a trend filter such as a 50 day EMA so you only take TSI buy signals when price is above the average and TSI sell signals when below. Layer in volatility awareness with the ATR so your stop is wide enough to survive normal noise on a name like Reliance. Volume confirmation matters too. A TSI zero cross backed by rising delivery volume is far more trustworthy than one on a thin, low volume drift.

TSI and the MACD are cousins, both built on EMAs of price, so stacking them adds little. It is more useful to combine TSI with a different family of tool, such as a support and resistance map or a higher timeframe trend read. The goal is confluence from independent signals, not three indicators that all say the same thing.

Limitations, Lag and False Signals

The very smoothing that makes TSI clean also makes it lag. In a fast reversal it will turn well after price, so a pure TSI exit can give back a chunk of an open profit. In a sideways, range bound stock the TSI wanders around zero and produces a string of small losing zero crosses, the classic chop trap. This is why the high +74 reading on Reliance above is a caution flag, not a green light, and why a hard stop loss is non negotiable.

• Lag, TSI confirms trends late, so entries and exits both arrive after the obvious move has begun.
• Whipsaws, in flat markets repeated zero crosses generate small losses that add up with costs.
• Scale confusion, TSI is not RSI, a reading of +70 is normal in a trend and not an automatic sell.
• Event risk, results, RBI policy and global gaps override any oscillator, so respect the calendar.

Sources and Further Reading

For authoritative data and further reading on this topic, refer to Zerodha Varsity, Investopedia, NSE India and NSE Indices (Nifty Indices). Always confirm current rules, rates, lot sizes and contract specifications on the official source before you trade.

Sources and Further Reading

For authoritative data and further reading on this topic, refer to Zerodha Varsity, Investopedia, NSE India and NSE Indices (Nifty Indices). Always confirm current rules, rates and contract specifications on the official source before you trade.