The four lines of the TDI
| Line | Colour (usual) | How it's calculated | What it tells you |
|---|---|---|---|
| RSI price line | Green | A 2-period moving average of the 13-period RSI | Short-term momentum |
| Trade signal line | Red | A 7-period moving average of the same RSI | A slower line to cross |
| Market base line | Yellow | A 34-period moving average of the RSI | The overall trend and direction |
| Volatility bands | Blue | Bands around the base line, 34 periods wide, set about 1.6 standard deviations from it | How volatile the market is |
The drawing above is a real TDI calculated from a sample price series with those settings. Many versions set the bands at 1.6185 standard deviations. Later variants change the RSI period or switch to exponential averages, so check the inputs of whichever version you load.
The 32, 50 and 68 levels
- Above 50: momentum is on the buyers' side; below 50, on the sellers'.
- Near 68: momentum is stretched to the upside. Malone's notes treat it as a zone where buying tends to slow, so new longs are avoided there; it isn't an automatic sell.
- Near 32: the same on the downside.
The signals traders use
- Price line crosses the signal line. Green crossing above red is a short-term bullish signal; below is bearish. On its own it gives many false signals.
- Both lines against the base line. Green and red above the yellow line, and rising, suggests an uptrend; below it, a downtrend. Many traders only take crosses in the base line's direction.
- Band squeeze. When the blue bands narrow, volatility is low, and a breakout often follows. When they widen, the market is moving hard.
- The price line leaving the bands shows an extreme move, which can mean exhaustion or the start of a strong trend.
Traders who follow Malone's approach often look for a rising base line above 50, the green line crossing above the red, and a bullish candle at a support level, and exit when the green line crosses back below the red or falls back inside the upper band.
Where to get the TDI
The TDI isn't one of MetaTrader 5's built-in oscillators. It's available as free custom indicators, for example in MQL5's CodeBase, and as community scripts on TradingView; search "Traders Dynamic Index" in each platform's indicator library. Check a script's settings against the table above, because versions differ.
The limits of the TDI
- It's all RSI. Every line comes from the same RSI, so it lags price like any average and adds no new information about the market, only a different view of momentum.
- Crosses whipsaw in ranges. In sideways markets the green and red lines cross back and forth.
- Test before you trust. Backtest your exact rules, with real spreads, before trading them; the risk of ruin calculator shows what your win rate and reward-to-risk mean for an account.