The Triple EMA Indicator (TEMA) is an exponential moving average founded in 1994 by Patrick Mulloy. It replaced the Double Exponential Moving Average (DEMA). TEMA indicator was developed to deal with the problem of lag encountered in making trading decisions while trading with EMAs. However, unlike traditional EMAs, the triple EMA uses a different lag, making it more responsive and effective in short-term trading.
What is the TEMA Used For?
The Triple EMA was designed to help smoothen price fluctuations, making it easier for traders to identify trends without experiencing lags involving traditional moving averages (MA). To enhance this, TEMA takes multiple exponentials moving averages (EMAs) of the initial EMA and then subtracts some of the lag.
TEMA also helps identify trend direction, signal potential short-term trend pullbacks or changes, and provide resistance or support. Additionally, when the price is above the TEMA, it helps confirm the uptrends, and when the price is below, it helps to confirm a downtrend. (Try out indicators on Tradingview.com)
Calculations of TEMA
Tipple EMA = (3×EMA1) – (3×EMA2) + EMA3
Definitions
EMA1= Original EMA
EMA2= EMA of EMA1
EMA3= EMA of EMA2
Comparison of TEMA with Other Indicators
TEMA uses a triple-soothed EMA on top of the single and double EMAs used in the formula for its predecessor DEMA. Unlike the DEMA, the offset developed using the three EMAs produces a moving average that stays closer to the price bars.
Triple Exponential Moving Average Indicator | Indicator Series Click To TweetTEMA responds more quickly than DEMA and other traditional EMAs, as it can be used to confirm trends and spot changes in a trend.
TEMA crossovers (whether of another TEMA or price) happen much earlier than those of DEMA or other traditional EMA because of its ability to react more quickly
Bottom Line
The triple EMA indicator was developed to make it easier for traders to determine their strengths and weaknesses without the lags like those in the traditional EMAs. Its calculation takes multiple EMAs of the original EMAs and then subtracts lag for the final results, making it more effective. For more information, contact us to learn more today.