The True Strength Index & Broadening Formation: The Hidden Formula Experts Swear By

If you’ve ever stared at a chart and felt like you were trying to read hieroglyphics, don’t worry—you’re not alone. The Forex world is packed with indicators that sound like something out of a sci-fi movie. One of those is the True Strength Index (TSI), and another is the mysterious, often misunderstood Broadening Formation. Most traders skip over these gems, probably because they sound more like secret government projects than tools to earn a profit. Today, we’re about to dig deep, mix humor with some elite trading wisdom, and give these two a well-deserved spotlight.

Why Most Traders Get It Wrong (And How You Can Avoid It)

True Strength Index. Sounds powerful, right? Like it belongs in a superhero movie where it helps the protagonist defeat an enemy called “the Market.” The truth is, many traders avoid TSI because they don’t understand it. They prefer the simplicity of RSI or MACD, which—let’s face it—are like the generic fast-food of indicators. Sure, they work, but they lack that spice that turns a decent trade into a showstopper.

Let’s break this down. The True Strength Index helps you gauge trend strength. But here’s the magic: it’s particularly good at helping you dodge those dreaded false signals. You know the kind—like the times you think you’re on the verge of a winning streak, but then the market reverses faster than your enthusiasm for a failed New Year’s resolution.

TSI works by smoothing price changes over multiple timeframes, effectively distinguishing between a true trend and that dreaded market noise. In layman’s terms: it’s like trying to figure out if that “SALE!” sign means actual savings or just a bunch of overpriced shoes that nobody wants. TSI helps you distinguish the good deals from the trash. It’s trend-surfing at its finest—no wipeouts allowed.

Broadening Formation: It’s Not Just Your Chart Going to the Gym

If you’re familiar with the Broadening Formation, you might’ve experienced the existential dread of seeing your chart expand like your waistband post-holidays. Picture two trendlines diverging as prices swing higher highs and lower lows—yes, it’s basically a financial rollercoaster. You can almost hear the distant scream of traders as their profits get caught in the steep loops.

But here’s the kicker: that divergence is your friend. Most people shy away from this pattern because it looks chaotic. But I promise you, there’s method in the madness. The Broadening Formation reveals instability—where prices swing wildly before settling, usually after some notable market news or event. And the trick here is understanding where that settlement is likely to take place. Sure, it looks like a five-year-old’s attempt to draw triangles, but if you play it right, you can profit when the pattern eventually collapses or “tightens.” The more experienced traders look at this pattern and salivate because they know it’s a harbinger of big moves. For us, it’s like buying Bitcoin in 2010—potential goldmine if you know what to do.

How TSI & Broadening Formation Make the Ultimate Tag-Team

So, how do you take these two tools and create a strategy that’ll have you grinning like someone who just dodged a bad trade? Think of the True Strength Index as the trend detective and the Broadening Formation as the opportunity spotlight. TSI tells you whether the overall strength is solid or shaky, while Broadening Formation gives you volatility in full, unfiltered glory.

Step-by-Step Approach:

1. Identify Broadening Formation: First, start looking for those diverging trendlines. If you spot prices moving to extreme highs and lows in a widening shape, you’re looking at a Broadening Formation. Bingo!
2. Confirm with TSI: Check out your True Strength Index. If TSI is indicating strength (above zero) while prices in the broadening pattern push higher highs, you might be looking at a genuine breakout. If TSI looks weak, that price surge might be fake—time to step back and reassess.
3. Ride the Wave or Bail Out: Enter your trade, but ensure that you’re employing strict risk management. Broadening Formations have an unfortunate reputation for catching overconfident traders off guard. Use TSI as your compass—if it shifts from strong to weak, that’s your cue to reconsider.

Hidden Patterns That Drive the Market—Most Traders Miss These

Both the TSI and the Broadening Formation are infamous for being overlooked, but why? Most traders stick to mainstream indicators because they feel comfortable. The herd mentality takes over. But do you know what happens to the herd? They usually end up grazing while someone else (hint: the outliers) takes the real prize.

According to Tom Demark, an expert in technical analysis, the beauty of the Broadening Formation is its unpredictability—and that’s where the opportunity lies. He once said that finding beauty in chaos is how the best traders operate. Understanding TSI in this context gives you that upper edge, like a secret ingredient in your grandmother’s pie recipe that only she knew would work.

The Forgotten Trick That Outsmarted the Pros

Here’s a tactic few will tell you: use the Broadening Formation not to trade within it, but to prepare for the resolution. Most traders make the mistake of trying to catch each tiny move within the formation. You’ve seen them—staring at their screen, placing trades at every move like a hyperactive day trader that’s had too much coffee. Instead, zoom out. Let the formation do its thing, and use TSI to signal when the trend is legitimate and ripe for trading.

By using the TSI as a gauge for market strength, you’re essentially working with two maps—one tells you where you are (Broadening Formation), and one tells you if you’re on a stable path or about to walk straight into quicksand (TSI). Together, they form a powerhouse combination that gives you a view most traders simply miss.

Case Study: The EUR/USD Mayhem

Take, for example, the EUR/USD pair back in early 2023—a perfect example of Broadening Formation wreaking havoc. Traders everywhere were trying to catch every small bounce inside that crazy formation. Meanwhile, those who employed the TSI for confirmation waited patiently, saw where the true trend strength aligned, and hopped on for a significant breakout. Those traders didn’t just make a profit; they took the market to the cleaners while everyone else panicked.

Myth-Busting Time: True Strength Index Isn’t Just RSI on Steroids

A lot of traders think TSI is just a glorified version of RSI. That’s like calling a Tesla just a “fancy bicycle.” While RSI tells you when the market’s overbought or oversold, TSI filters out the noise, delivering more reliable trend information. It’s like using noise-canceling headphones when the world is screaming about a “market meltdown.” This is especially true when you couple TSI with chaotic price action like the Broadening Formation—it gives you the power to tell whether a breakout is legit or just another false flag.

The Ninja Tactic: Using Divergence Wisely

Now, this is where the real magic happens. Combining TSI divergence with a Broadening Formation can uncover some massive opportunities. Picture this: you’ve got a price that’s soaring to new highs, but your TSI isn’t confirming it. That divergence is your early warning signal—like your friend warning you about that shady Craigslist deal.

The market might be making a move, but if TSI doesn’t agree, you know it’s time to sit tight, manage risk, or prepare to go short. It’s not flashy, and it’s certainly not the most popular move at the trading party, but remember—being the contrarian is where the gold is often found.

Putting It All Together: A Quick Recap

Here’s what we’ve covered and why it’s so powerful:

• True Strength Index (TSI) is your ally for gauging market strength—ideal for determining whether a trend is truly worth riding.
• Broadening Formation represents instability, but knowing how to spot when it resolves means catching the big moves while others get whiplash from the price action.
• The combination of TSI and Broadening Formation is your secret weapon for filtering out false signals, catching genuine breakouts, and ultimately dodging losses while others overtrade.

Don’t forget—trading is a bit like comedy. It’s all about timing, and if you’re relying on the same stale material as everyone else (read: RSI and MACD), then you’re never going to stand out from the crowd. Use TSI to perfect your timing, combine it with the unpredictable drama of the Broadening Formation, and you’ll have a market strategy that’s both unique and effective.

Ready to Take Your Trading to the Next Level?

If you’re curious about leveraging elite trading tools and learning hidden techniques that most traders overlook, you might want to check out what we offer. Whether it’s real-time Forex news to catch those unexpected market shifts, a community that dives into trading insights like the ones we shared here, or a smart tool to manage your trades effectively—we’ve got something for every kind of trader.

Visit StarseedFX Forex News to stay ahead of the market, or join our Forex Community for expert insights and daily trading tips. And if you’re ready to get your edge, our Free Trading Plan and Free Trading Journal are perfect tools to keep you focused and performing.

Until next time, stay sharp, think contrarian, and remember—don’t just follow the herd. Lead it.

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Image Credits: Cover image at the top is AI-generated