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TFS is a trend-following system introduced by Bryan Strain in "How to get with the trend and out at the end" in the Stock & Commodities magazine in 2000. It consists of a set of three indicators, used together to generate entries. We here focus on the TFS tether line indicator.
TFS formula simply consists in the calculation of a midpoint for each bar; it calculates indeed the highest of the price highs over 50 days back, then the lowest of the price lows over the same period, sums the two values and gets the half of the sum. The close price value seems then to cluster or tether around the line thus obtained.
TFS tether line period is generally taken as 50 days, but you may change that value to fit your own needs. The TFS tether function I have written, named 'tfs_tether ', takes that period as argument.
