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Posted on Mar 31, 2022 at 09:58 AM
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Profitable Trading with the Traders' Dynamic Index (TDI) indicator

The Traders’ Dynamic Index indicator is a pretty versatile indicator, and arguably the only technical indicator that can read the sentiment, momentum and volatility of the market all at once.

Car_Dashboard

The Traders’ Dynamic Index (TDI) indicator can be likened to a car’s dashboard. 

A car’s dashboard displays the speedometer showing the car’s speed, tachometer showing the engine’s working speed, odometer indicating the distance covered, temperature gauge showing the temperature of the engine, fuel gauge showing the fuel tank level, seat belt warning light, parking-brake warning light, engine-malfunction lights and several other indicators.

Contained in this Article:

  • A breakdown of the Traders' Dynamic Index (TDI) indicator.

  • Why you need the TDI on your MT4.

  • Detecting entry and exit signals with the TDI. 

The car dashboard, with the aid of these indicators, provides the driver with the current condition of his vehicle. 

He does not need to pop up the car’s ‘hood’ to measure the oil level or open up the fuel tank to measure how far down the petrol had gone.

With a quick glance at the dashboard, the driver can easily say: “We’re low on fuel and will need to visit the gas station to make this trip” or “The seat belt lights are flashing, please use your seatbelts.”

Similarly, the Traders’ Dynamic Index (TDI) is a MetaTrader 4 indicator that uses a combination of the Relative Strength Indicator (RSI), Moving Averages, and Volatility Bands (a.k.a. Bollinger Bands) to present a quick and visual representation of the current situation of the Forex market to the trader.

In other words, it presents visual alerts of the current market condition and saves the trader from monotonous and strenuous analysis.

The TDI is best used for scalping and day-trading and may be used with or without a stop-loss (according to your trading strategy or low timeframe pips target).

Components of the Traders’ Dynamic Index (TDI)

tdi-alerts-indicator

To manually set up the TDI on your MetaTrader 4 application, it’s important to note the components that constitute the TDI and understand their respective parameters.

As mentioned in previous paragraphs, the TDI is made up of the following components: 

  • The Relative Strength Index (RSI) indicator: Developed by J. Welles Wilder, the RSI is scaled from ‘0  to 100’ and used to determine the overbought and oversold conditions—in other words—the strength of the Forex market.
  • Moving Averages (MA): Arguably one of the most popular indicators in the Forex trading world, the MA is used to identify trends in the Forex market.

  • Bollinger Bands: These are also regarded as ‘Volatility Bands’, and are used for determining optimum entry and exit positions in the Forex market through the identification of overbought and oversold commodities.

Setting Up the TDI on the MetaTrader 4

To manually set up the Traders' Dynamic Index indicator (TDI) on your MetaTrader 4, you'll be needing these four components:

A. The Relative Strength Index (RSI) indicator
B. 7-period Moving Average
C. 34-period Bollinger Bands
D. 50-period 1-shifted Moving Average

Go Ahead and Apply the Following Parameters to Each of the Four Components:

N.B.: For each step, ensure to first tap the indicator selection window 'f’ on the top of the Candlestick Chart.

A. The Relative Strength Index (RSI) indicator

  • Add the “Relative Strength Index” indicator to the setup.
  • Set the “Period” to 21.
  • Set “Apply to” to Close.
  • Select “Levels” and add 20, 30, 50, 70, and 80.
  • Set the colour to Green/Lime.

B. 7-period Moving Average

  • Tap the indicator selection window ‘f’ and select “Indicator Window 1”.
  • Set “Period” to 7.
  • Set “Method” to Exponential.
  • Set “Apply to” to the first indicator’s data.
  • Set the colour to Red.

C. 34-period Bollinger Bands

  • Tap the indicator selection window ‘f’ and add the “Bollinger Band” indicator.
  • Set the “Period” to 34.
  • Set “Apply to” to the first indicator’s data.
  • Select “Levels” and add 0, 32, 50, 68, and 100.
  • Set the colour to Dark Blue.

D. 50-period 1-shifted Moving Average

  • Tap the indicator selection window ‘f’ then select “Indicator Window 1”.
  • Set “Period” to 50.
  • Set “Shift” to 1.
  • Set “Method” to Linear Weighted.
  • Set the color to Yellow.

The combo of all items 1-4 gives the trader a full picture of the current condition of the Forex market. Go ahead and follow them step-by-step and you're sure to get the TDI setup shown in the picture below.

What Next After Setting up the TDI?

TDI_lines

Now that you have set up the TDI using the components explained above, let's proceed to identify them on your MetaTrader 4 chart. The lines are colour coded as follows:

  • Dark Blue: The two blue lines engulfing other lines in the picture are the Bolinger Bands (a.k.a. BB-34).
  • Green/Lime: The green line is a Relative Strength Index (a.k.a. RSI-13).
  • Red: The red line is the ‘Signal Line’ and is basically a Moving Average used to identify good entry setups.
  • Yellow: This is the most important line and is regarded as the ‘Market Base Line’. It acts as the Trend Indicator as is designated as (MA-34). This line ‘ties’ the other lines together and makes the whole indicator tradable. 

HOW THE TDI WORKS

The TDI indicator works as a signal that tells the trader when to buy and sell.

The yellow line or Market Base Line is regarded as the ‘master line’ because it ‘calls the shots’ other lines depend on it. 

The position of other lines relative to the yellow line indicates whether to buy or sell:

  • Green/Lime line ABOVE Red line, and both lines ABOVE Yellow line  = EXTENDED BUY
  • Green/Lime line BELOW Red line, and both lines BELOW Yellow line = SELL

And the blue lines? I’ll touch on that in a jiffy.

TDI_signals

In the situation that the market is not in a strong trend, the dark blue lines (Bollinger Bands) will act as the overbought/oversold indicators, and when the green/lime lines touch them, the chances of a reversal or retracement are further multiplied.

As the TDI presents a visual representation of the market condition, it’s recommended to apply the TDI on a demo account prior to live trading to get familiar with its various patterns and trade signals.

Why You Need the TDI as a Forex Trader

The Traders’ Dynamic Index indicator is a pretty versatile indicator, and arguably the only technical indicator that can read the sentiment, momentum and volatility of the market simultaneously.

With these combined qualities, you can easily analyse and detect entry and exit signals like a boss.

Even more beneficial is the fact that you get to combine the qualities of several indicators into ONE badass indicator, which could just be the perfect "holy grail" you seek.

Got questions about the TDI, go ahead and drop a comment in the comment box below.


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