Traders Dynamic Index (TDI)

A forex-forum favorite that is really three familiar tools stacked on one RSI: a smoothed RSI, its signal line, and Bollinger Bands drawn on the RSI itself.

What it is

The Traders Dynamic Index (TDI) is a composite indicator popularized on forex forums in the 2000s, commonly attributed to Dean Malone. Despite the imposing name and its reputation as an all-in-one 'market dashboard', its components are entirely ordinary: take a 13-period RSI, smooth it twice to create a fast 'price line' and a slower 'signal line', then draw Bollinger Bands (a 34-period moving average with volatility bands) on the RSI values themselves. That is the whole indicator — RSI plus moving averages of RSI plus Bollinger Bands of RSI, plotted together in one pane. Nothing in it is new math; the value, if any, is having momentum level, momentum smoothing, and momentum volatility visible in one place. TDI is often sold in packaged 'systems' with elaborate entry rules; none of that folklore is part of the calculation, and none of it has published evidence behind it. Like every indicator, TDI describes past price behavior and predicts nothing. This entry is educational only, not financial advice, and all trading carries risk of loss.

How it works

Every line in the TDI is derived from a single RSI series. Step one: compute a 13-period RSI of the close — a bounded 0-100 momentum reading. Step two: smooth that RSI with a 2-period simple moving average; this is the green 'RSI price line', a barely-smoothed copy of RSI that hugs it closely. Step three: smooth the same RSI with a 7-period SMA; this is the red 'trade signal line', a slower reference the fast line can cross. Step four: compute a 34-period SMA of the RSI — the 'market base line', read as the longer-term momentum drift. Step five: compute the standard deviation of RSI over the same 34 bars, multiply by a coefficient (1.6185 in the classic version — a number chosen by the author, with the golden-ratio flavor being decoration, not derivation), and add and subtract it from the base line to form 'volatility bands'. The result is Bollinger Band logic applied to RSI instead of price: when RSI readings have been swinging widely the bands are far apart, and when momentum has been quiet they contract. Because every layer is an average of past values of an average of past prices, all TDI lines lag by construction, and the fast/slow crossings inherit all the whipsaw behavior of any short moving-average pair.

How traders read it

• Fast/slow crossings: the 2-period line crossing the 7-period line is the classic 'signal' — mechanically it just means very recent RSI values moved above or below the slightly-less-recent average. In quiet markets these crossings happen constantly.
• Position vs 50: all lines sitting above the 50 level means recent RSI has been above midline — upward momentum bias in the recent past; below 50, the opposite.
• Market base line: the 34-period average of RSI is read as the slow momentum drift; the fast lines operating above a rising base line describes momentum aligned across speeds.
• Band width: contracted volatility bands mean RSI has been in a narrow range recently (quiet momentum); expanding bands mean momentum readings have been swinging. Width describes recent variability, not what comes next.
• Band touches: the fast line reaching the upper or lower band means RSI is stretched relative to its own recent 34-bar distribution — a relative-extreme description, not a reversal instruction.
• Forum lore attaches names ('shark fin', specific level rules like 32/50/68) to TDI shapes — treat all of these as unverified conventions, not tested findings.

Common settings

The classic configuration is RSI length 13 on the close; fast (price) line = 2-period SMA of RSI; slow (signal) line = 7-period SMA of RSI; band length 34 with a multiplier of 1.6185 on the standard deviation of RSI. Some versions use 21 or 34 for the RSI and different band multipliers (commonly 1.6185 or 2.0). Every one of these numbers is a convention someone chose; changing any of them changes every crossing and band touch, so state your settings explicitly when comparing results.

Strengths

• Consolidates momentum level, momentum smoothing, and momentum variability into a single pane, which can reduce chart clutter compared to running RSI, an MA pair, and bands separately.
• Fully decomposable: every line reduces to a known, documented calculation (RSI, SMA, standard deviation), so the indicator can be verified exactly against any platform.
• The bands-on-RSI idea gives a relative definition of 'stretched momentum' that adapts to recent conditions rather than relying on fixed 30/70 lines alone.
• Easy to implement correctly in Pine v6 with only ta.rsi, ta.sma, and ta.stdev — no exotic functions and no repainting risk in the basic calculation.
• A useful teaching example of how composite indicators are assembled from simple parts.

Pitfalls to watch

• It is not new information: TDI plots one RSI series five different ways. If RSI is uninformative in current conditions, no amount of smoothing and banding changes that.
• Whipsaw by design: a 2-period versus 7-period crossing pair flips constantly in ranging markets, producing many conflicting crossings with no follow-through.
• Layered lag: every line is a moving average of RSI, which is itself built from smoothed past price changes — by the time lines cross, the move they describe is already underway or over.
• Folklore attachment: TDI circulates inside packaged 'trading systems' with precise-sounding rules (specific levels, pattern names) that have no published evidence; the precision of the rules is not evidence of their validity.
• Settings sensitivity: 13/2/7/34/1.6185 are author choices, not derived constants — the golden-ratio-style multiplier in particular is decoration; nearby values behave similarly and none is 'correct'.
• No predictive power: TDI describes recent momentum behavior only. It does not forecast price, and no indicator removes the risk of loss.

Pine v6 example

//@version=6
indicator("Traders Dynamic Index (TDI)", overlay = false)

rsiLen   = input.int(13, "RSI Length", minval = 1)
fastLen  = input.int(2,  "Price Line Length", minval = 1)
slowLen  = input.int(7,  "Signal Line Length", minval = 1)
bandLen  = input.int(34, "Band Length", minval = 2)
bandMult = input.float(1.6185, "Band Multiplier", minval = 0.1, step = 0.05)

r = ta.rsi(close, rsiLen)
priceLine  = ta.sma(r, fastLen)
signalLine = ta.sma(r, slowLen)
baseLine   = ta.sma(r, bandLen)
dev        = bandMult * ta.stdev(r, bandLen)

plot(priceLine,      "RSI Price Line",  color = color.green)
plot(signalLine,     "Signal Line",     color = color.red)
plot(baseLine,       "Market Base",     color = color.orange)
plot(baseLine + dev, "Upper Band",      color = color.blue)
plot(baseLine - dev, "Lower Band",      color = color.blue)
hline(50, "Midline", color = color.gray)

Pro tip: Before adopting any TDI rule you read on a forum, decompose it: 'green crosses red above 50' just means a 2-bar average of RSI moved above a 7-bar average while RSI sat above midline — say it that way and evaluate whether that plain description deserves the weight the rule gives it. If you find TDI useful, it is likely as a compact momentum display, not as a signal machine. This is educational information only, not advice; TDI describes the past, predicts nothing, and all trading carries risk of loss.

Educational only — not financial advice, not a recommendation to trade. No indicator is predictive; trading involves substantial risk of loss.