Introducing the TCI Indicator to the Web

Today, there are many technical analysis tools available—indicators, oscillators, indices, ratios, and chart patterns. The problem is that all of them are designed to look only backward, and not forward. 🔗 More: » Technical Analysis Guide

TradingCenter, drawing on extensive trading experience, has developed a new trading indicator called TCI. The Trading Center Indicator (TCI) can be used to analyze any traded financial asset in any timeframe—both historically and in forecasting future movements.

📌 TCI Concept: “Look backward to identify what to buy, then look forward to decide when to buy it”

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The Improved Version of TCI at Trading Center

This Is How TCI Works

Since the original creation of the TCI model in the early 2000s, the formula behind it has been continuously evolving. This is because the global economy and market conditions are always changing. To stay effective, any trading system must adapt to these changes. For example, when market volatility increases, trading systems need to adjust by shortening timeframes, widening stop-loss levels, and using tighter capital leverage.

What Distinguishes the New Version of TCI

What sets the new version of TCI apart from earlier versions is the way timeframes are now defined and analyzed. The updated TCI uses timeframes based on the Fibonacci sequence. This approach improves the accuracy of TCI’s forecasting results.

Why the Fibonacci Sequence Matters

The Fibonacci sequence is based on the Golden Ratio (Phi or Φ), approximately 1.618 (1.61803398874989484820…). This ratio appears throughout the universe, in nature, and even in the proportions of the human body. Financial markets have long recognized the importance of Fibonacci mathematics, which is why tools like Fibonacci Retracement are widely used in technical analysis today. 🔗 More: » Trading with Fibonacci Primes

TCI Long & TCI Short

The new TCI signals are generated by two separate indicators: TCI Long and TCI Short. This is because both short-term and mid-term trends are important when identifying whether an asset or market is overbought or oversold. TCI Short also helps fine-tune entry and exit timing. As mentioned earlier, TCI can be used to look forward and define the best times to enter or exit any market or asset.

Here’s an example using TCI Long and TCI Short on the EUR/USD pair in the Forex market. If you look closely, you’ll see that when TCI Long hits +40%, the market tends to fall. That suggests hidden supply appears at that level, quickly closing out what are likely high-profit positions.

Chart: TCI Long and TCI Short on EUR/USD 2009–2013

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Defining the Market Pattern Using Technical Analysis and Money Management

Trading systems like TCI can be used to forecast the natural course of market movements. This process can be described as "Defining the Market Pattern Using Technical Analysis." 🔗 More: » Chart Patterns & Probabilities

However, major macroeconomic events or unexpected news can disrupt technical patterns. Traders should always keep this in mind and avoid heavy exposure or using high capital leverage.

📌 Tip: "Forecasting systems are powerful—but they’re only profitable when combined with proper money management."

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TCI Formula (2 Moving Averages Combined)

TCI uses several daily data points, such as opening/high/low prices and trading volume. It is calculated using two moving averages that include all this trading activity. Moving Average (1) gives a daily valuation, while Moving Average (2) adjusts or corrects that result. Each moving average is measured separately.

Looking Backward and Forward

The two moving averages that form the core of TCI can be set for either backward or forward timeframes.

1. When set backward, TCI identifies overbought or oversold levels.

2. When set forward, TCI forecasts the best timing to execute trades.

Three Questions TCI Can Answer

TCI helps answer these three questions:

1. Has a financial asset reached technically overbought or oversold levels?

2. How strong is that overbought or oversold condition, and how should it influence my trading?

3. When is the best time to trade the market?

📌 Tip: “You can buy, you can sell, or wait for the right moment to do either.”

What Can TCI Forecast?

Using TCI on a financial asset can show overbought or oversold levels and also suggest the ‘theoretical’ best time to trade. It can help forecast future trend reversals, but it can do even more. TCI allows you to compare stocks, indices, currency pairs, and commodities. By analyzing past data, it can also create unique charts.

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Testing TCI – Graphical Implementation

“Using a long-term TCI chart to study the historical behavior of the Nasdaq Composite Index”

The chart below shows the TCI indicator applied to the Nasdaq Composite from June 4, 1982, to June 4, 2012.

Chart: The first version of TCI on Nasdaq

 

Some Quick Observations on the Long-Run TCI Nasdaq Chart:

1. When TCI reaches 40%, the market is dangerously overbought.

2. When TCI reaches -55%, the market is deeply oversold.

3. After TCI signals overbought or oversold levels, significant trend reversals follow, often with returns over 50%.

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Testing TCI Historical Results / Conclusions

TCI has been extensively tested over the past decade on various stock indices and other financial instruments. The results are interesting and often quite accurate.

Here are some key conclusions from TCI testing:

1. TCI is more reliable on stock indices, Forex, and commodities than on individual stocks.

2. TCI works better on high-volume assets than on low-volume ones.

3. In many cases, the predicted trend reversal date was missed by just one day, often because the reversal happened intraday rather than the following day.

Are TCI Analysis Results Offered for Free?

Yes, TCI results are offered for free, and currently, there are no plans to sell them. 🔗 More: » Forex Trading Signals

Does TCI Make Mistakes?

Of course, it does. The main cause of false signals is surprising news, which is common in financial markets and can disrupt any technical forecast. Because of this, no forecast can account for unexpected news or similar events.

📌 Tip: “But sometimes what seems like a big surprise isn’t a surprise at all.”

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TCI Signals Are Posted for Free on Trading Center

From time to time, you’ll find TCI signals for Forex, commodities, stocks, and indices. We focus especially on EUR/USD and GBP/USD in Forex, and Dow Jones Industrial and Nasdaq for global indices. For commodities, we track gold prices.

Why focus mostly on popular assets? Because popularity means liquidity and broker competition, which leads to narrower spreads. Also, popular assets have better and more available information.

Trading Center’s Learning section offers essential information about the most common technical analysis tools.

🔗 Check Also: » TCI+ Forex Trading System

 

■ Trading Center Indicator (TCI)

Giorgos Protonotarios, Financial Analyst for TradingCenter.org (c)