What Is 𒉰the Triple Exponential Moving Average (TEMA)?

The triple exponential moving average (TEMA) was designed to smooth price fluctuations, thereby making it easier to identify trends without the lag associated with traditional moving averages (MA). It does this by taking multiple 澳洲幸运5官方开奖结果体彩网:exponential moving averages (EMA) of the original EMA and subtracting out some of the lag.

The TEMA is used like other MAs. It can help identify trend direction, signal potential short-term trend changes or pullbacks, and provide support or resistance. The TEMA can be compared with the 澳洲幸运♊5官方开奖结果体彩网:double exponential moving average (DEMA).

Formula and Calculation for the TEMA

$\begin{aligned} &\text{Triple Exponential Moving Average (TEMA)} \\ &\;\;\;= \left( 3*EMA_1\right) - \left( 3*EMA_2\right) + EMA_3\\ &\textbf{where:}\\ &EMA_1=\text{Exponential Moving Average (EMA)}\\ &EMA_2=EMA\;\text{of}\;EMA_1\\ &EMA_3=EMA\;\text{of}\;EMA_2\\ \end{aligned}$​Triple Exponential Moving Average (TꩵEMA)=(3∗EMA1​)−(3∗EMA2​)+EMA3​where:EMA1​=Exponential Moving Average (EMA)EMA2​=EMAofEMA1​EMA3​=EMAofEMA2​​

1. Choose a lookback period. This is how many periods will be factored into the first EMA. With a fewer number of periods, such as 10, the EMA will track price closely and highlight short-term trends. With a larger lookback period, such as 100, the EMA will not track price as closely and will highlight the longer-term trend.
2. 澳洲幸运5官方开奖结果体彩网:Calculate the EMA for the lookback period. This is EMA1.
3. Calculate the EMA of EMA1, using the same lookback period. For example, if using 15 periods for EMA1, use 15 in this step as well. This is EMA2.
4. Calculate the EMA of EMA2, using the same lookback period as before.
5. Plug EMA1, EMA2, and EMA3 into the TEMA formula to calculate the triple exponential moving average.

What Does the TEMA Tell You?

The TEMA reacts to price changes quicker than a traditional MA or EMA will. This is because some of t𒉰he lag has been subtracte🍰d out in the calculation.

A TEMA can be used in the same ways as other types of MAs. Mainly, the direction the TEMA is angled indica🧸tes the short-term (averaged) price direction. When thཧe line is sloping up, that means the price is moving up. When it is angled down, the price is moving down.

There is still a small amount of lag in the indicator, so when prices change quickly the indicator may🔯 not change its angle immediately. Also, the larger the lookback period, th🤪e slower the TEMA will be in changing its angle when price changes direction.

The TEMA and Trend Direction

The location of the TEMA relative ༒to the price also provides clues as to the trend direction. Generally, when the price is above the TEMA it helps confirm the price is rising for that lookback period. When the price is below the TEMA, it helps confirm the price is falling for that lookback period.

That said, a lookback period should be chosen so this actually holds true most of the time. Therefore, it is up to the trader t🀅o choose the appropriate lookback period for the asset they are trading if they intend to use the TEMA for helping to identify 💮trends.

If the TEMA can help identify trend direction, then it can also help identify trend changes. If the price is above the average, and then drops below, that could signal the uptrend is 澳洲幸运5官方开奖结果体彩网:reversing, or at least that the price is entering a pullback phase. If the price is below the average, and then moves above it, that signals the price is rallying. Such 澳洲幸运5官方开奖结果体彩网:crossover signals may be used to aid in deciding whether to ꧑enter or exit positions.

The TEMA for Support and Resistance

The TEMA may also provide 澳洲幸运5官方开奖结果体彩网:support or resistance for the price. For example, when the price is rising overall, on pullbacks it may drop to the TEMA, and then the price may appear to bounce off of it and keep rising. This movement is reliant upon the proper lookback period for the asset. If using the TEMA for this purpose, it should have already provided support and resistance in the past. If the indicator didn't provide support or resistance in the past, it probably won't in the future.💎

Finally, some traders use the TEMA, typically with a small lookback period, as an alternative to price itself. The single line filters out much of the noise on traditional 澳洲幸运5官方开奖结果体彩网:candlestick or bar charts. A 澳洲幸运5官方开奖结果体彩网:line chart would also work in this regard.

The TEMA vs. the Double🧜 Exponential Moving ﷺAverage (DEMA)

Both these indicators are designed to reduce the lag inherent in 澳洲幸运5官方开奖结果体彩网:average-based indicators. The TEMA reduces lag more than the double exponential moving average (DEMA).

The formula for the DEMA is different, which means it will provide the trader with slightly different information and signals. It is calculated by multiplying the EMA of price by two and then subtracting an EMA of the original EMA.

Limitations of Using the TEMA

While the TEMA reduces lag, it still inherits some of the traditional problems of other MAs. MAs are primarily useful in trending markets, when the price is making sustained moves in one direction or the other. During choppy times, when the price is seesawing back and forth, the MA or TEMA may provide little insight and will generate 澳洲幸运5官方开奖结果体彩网:false signals since crossovers may not result in a sustained move as long as the price stays 澳洲幸运5官方开奖结果体彩网:rangebound.

Reduced lag may benefit some traders, but not others. Some traders prefer their indicators to lag because they don't want their indicator reacting to every price change. Since the TEMA reacts quicker to price changes, it will track the price more closely than a 澳洲幸运5官方开奖结果体彩网:simple moving average (SMA), for example. But that also means that the price may cross the TEMA on a smaller price move than what is required to cross the SMA. Investors typically don't want to actively trade, so they don't wish to be 澳洲幸运5官方开奖结果体彩网:shaken out of positions unless there i𒐪s a significan⛄t trend change.

One 🍎type of 🍰MA is not better than another. Deciding which to use comes down to personal preference and what works best for the strategy someone is using.

The TEMA is best used in conjunction with other forms of analysis, such as 澳洲幸运5官方开奖结果体彩网:price action analysis, other technical indicators, and 澳洲幸运5官方开奖结果体彩网:fundamental analysis.

Example of the TEMA

Here's an example of a TEMA applied to the SPDR S&P 500 ETF.

The TEMA smooths out the price action. The angle of the TEMA helps id🐠entify the overall trend direction even dur🍸ing the day-to-day noise of minor price fluctuations.