Triple Exponential Moving Average (TEMA)

TEMA can be termed as a technical indicator with the unification of:

“A single exponential moving average”

“A double exponential moving average”

“A triple exponential moving average”

 

Objective Of TEMA

• To smoothen price and other data.

• To reduce the slow time (lag) taken by any individual exponential moving averages. It can be applied as a replacement for traditional moving average methodologies or other indicators. It also serves as a momentum indicator, or in other terms (TRIX) which follows “overbought & oversold markets.”

Calculation Based On The Chart 

1. EMA = 15- day EMA of the closing price

2. Double EMA = 15 days of the closing price

3. Triple EMA = 15-period day of the closing price

4. TRIX = 15-day in Triple EMA overbought and oversold

Redline - 15 day EMA (follows the price plot closest) Greenline - double EMA, Blueline - triple EMA The red line is the most inconsistent of the three lines. We need to observe how these two lines turn flattered as the lag increases.

It can be noticed that, when the triple 15-day EMA is moving down, “TRIX is negative”. And when the triple 15-day EMA raises, “TRIX is positive.” The upturns & downturns are kept to a minimum by the extra smoothing. To reverse a downtrend, it takes more than one-day advance.

TRIX As A Momentum Indicator Shows

When a negative value is demonstrated in an oversold market & positive value is demonstrated in an overbought market. A negative value suggests momentum is decreasing while a positive value suggests increasing momentum.

 Suggestions By Analysts

Purchase signal: When TRIX crosses above the zero line.

Sell Signal: When TRIX closes below the zero line.

Important market turning points can be identified by the difference between “Price & TRIX”

When TRIX is applied as a leading indicator, it is advisable to use it along with another market timing indicator to reduce false signals.

For Calculating TRIX

An EMA of the data is taken for a defined period. Then an EMA is taken of that result obtained for the same period. Again, followed by another for the second result. The percent change in the value of the third moving average is then returned as the value of the TRIX. At the beginning of the data series, the value of TRIX is considered to be Zero. As it uses EMA, primary values comprise in its calculation the zero value. It is possible to ignore values 3 times the period has been completed.