True Strength Index + Durable Goods Orders: The Hidden Trading Edge You Need to Know

The Forex World’s Best-Kept Secret: True Strength Index Meets Durable Goods Orders

Every trader has that one moment. The one where they think they’ve cracked the code—only to realize the market just pulled a fast one on them. It’s like thinking you’ve found a shortcut home, only to end up in a never-ending loop of wrong turns. But what if I told you there’s a way to truly measure market strength and anticipate shifts like a pro? Enter the True Strength Index (TSI) and Durable Goods Orders (DGO).

These two might not be the most glamorous pair, but when combined, they unlock a next-level trading edge that most traders ignore. Let’s dive deep into **why TSI matters, how durable goods orders shake up Forex markets, and how you can use them together to outsmart the masses.

What Is the True Strength Index (TSI), and Why Should You Care?

The True Strength Index (TSI) is like the lie detector test of momentum indicators. Developed by William Blau, TSI measures the strength of price movements while filtering out market noise. Unlike the RSI, which often screams ‘overbought’ or ‘oversold’ at the slightest sneeze, TSI takes a more refined approach by focusing on double-smoothed momentum calculations.

How TSI Works:

1. Tracks Momentum: Measures price strength by using a double-smoothed EMA (Exponential Moving Average).
2. Filters Out Whipsaws: Unlike RSI or MACD, TSI helps reduce fake-outs and gives a clearer trend direction.
3. Identifies Reversals Early: Pinpoints hidden divergences that other momentum indicators often miss.

???? Pro Tip: Combine TSI with volume analysis to confirm trend strength. If TSI signals bullish momentum but volume is weak, take a step back before jumping in.

Durable Goods Orders: The Unexpected Market Mover

If TSI is the market’s lie detector, then Durable Goods Orders (DGO) is the economic crystal ball.

Durable goods are big-ticket items (think aircraft, cars, and machinery) that consumers and businesses invest in for the long haul. When orders rise, it signals economic expansion. When they drop? A slowdown might be looming.

Why Should Forex Traders Care?

The DGO report, released monthly by the U.S. Census Bureau, directly impacts USD currency pairs. Strong numbers suggest businesses and consumers are confident, which often strengthens the USD. Weak numbers? The Fed might reconsider monetary policies, leading to market fluctuations.

???? Pro Tip: Watch for revisions. A positive DGO report can pump USD higher, but if the revised numbers come in weaker later, expect a reversal.

The Hidden Strategy: Combining TSI & Durable Goods Orders for Maximum Impact

Now here’s where the real trading ninja magic happens. By pairing TSI with Durable Goods Orders, you get a deadly combo for predicting USD strength.

Step-by-Step Strategy:

1. Check Durable Goods Orders Data: When the report drops (typically the fourth week of the month), observe if it beats or misses expectations.
2. Analyze USD Strength: Look at how the USD is reacting. If the numbers are strong, expect bullish momentum—but don’t trade yet!
3. Confirm with TSI: If TSI is above zero and rising, it confirms real strength in USD-based pairs (e.g., USD/JPY, EUR/USD falling).
4. Enter on a Pullback: If the DGO report is strong but price dips due to initial volatility, use the dip as an entry opportunity.
5. Set Stop-Loss & Targets: Place your stop below the recent swing low and aim for a 2:1 risk-reward ratio.

???? Bonus Tip: If DGO is weak but TSI remains positive, it could mean short-term USD strength before a reversal—so wait for confirmation before shorting.

Case Study: When This Strategy Called a Perfect USD/JPY Move

Let’s rewind to September 2023. Durable Goods Orders came in way below expectations, signaling economic contraction. However, instead of USD tanking immediately, TSI showed bullish divergence on USD/JPY. What happened next?

???? The USD initially dropped but then surged 150 pips higher as traders digested the TSI signal, proving that momentum leads fundamentals, not the other way around!

Final Thoughts: Stop Guessing & Start Trading Like a Pro

Most traders ignore hidden gems like TSI and Durable Goods Orders because they seem “too technical.” But the real money is made by those who go deeper.

By combining a momentum indicator that cuts through noise (TSI) with an economic report that reveals real trends (DGO), you can unlock insights that 99% of traders miss.

???? Now it’s your turn! Drop a comment below—have you used TSI before? Or do you plan on testing this strategy in your next trade?

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