TOPIC - Triple Exponential Moving Average -Indicator

✔️ Information reviewed and updated in June 2024 by Eduardo López

The technical analysis of many trading operators is based on indicators, which are used to make decisions about what operations to carry out, and how to enter and exit them. Indicators such as TEMA are tools that apply mathematical formulas to variables such as the price of an asset in order to better analyze the charts.

There are no specific indicators that are used for all operations, nor indicators that tell us what is going to happen. The best indicator for traders is the one that is useful, and helps to make better decisions. Next, we will talk more about the TEMA indicator, which helps to identify the direction of the trend.

➡Definition of the Triple Exponential Moving Average indicator

The triple exponential moving average was performed to smooth price fluctuations, making it easy to identify trends without the lag associated with traditional moving averages.

This indicator It helps to identify the direction of the trend, point out potential short-term trend reversals or reversals, and provide support or resistance. It can be compared to the double exponential moving average.

The TEMA reacts faster to changes than a traditional MA or EMA because part of its delay is subtracted in the calculation.


➡What is TEMA for?

This indicator can help to identify the direction of the trend, and identify the trend changes. If the price is above the average and then falls below, then it means that the uptrend is reversing, or that the price is entering a retracement phase.

If the price is below the average and then moves above it, then it means that the price is rising. These crossover signals can be used to help decide whether to enter or exit positions. It also helps to provide support or resistance for the price.

Some traders use this indicator with a small retracement period, as an alternative to price.

➡How is it obtained?

First, the exponential moving average in an days (MME1) is calculated, on the closing prices. Then the exponential moving average in an days of MME1 (MME2) is calculated. Finally, the exponential moving average in an days of MME2 is calculated.

In this way, the indicator TEMA = 2 * MME2-MME3 is obtained.


➡How is TEMA interpreted?

The Triple Exponential Moving Average indicator is a combination of three exponential moving averages:

TOPIC = 3 * (MM1-MM2) + MM3, where:

MM1 = Exponential moving average of the closing price (by default) and parameter p

MM2 = Exponential moving average of MM1 and parameter p

MM3 = Exponential moving average of MM2 and parameter p

This indicator is faster and smoother than a standard moving average. The TEMA and DEMA are used in place of the moving averages or applied on other indicators, such as the MACD or stochastic oscillators.

The TEMA and DEMA indicators are designed to reduce the lag inseparable from indicators that are based on averages.

Eduardo Lopez

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I am Eduardo López Martínez, I was born in Madrid, Spain and I am 48 years old. I am a journalist and I am part of the team. Do you want to know a little more about me? I invite you to read my biography.

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