The Triple Exponential Moving Average was originally designed to smooth price fluctuations. Thus, it makes identifying trends easier for traders without the lag associated with traditional moving averages. Traders look at this trend indicator as a useful tool in an otherwise choppy market.
In This Article
What is Triple Exponential Moving Average?
How To Analyse Chart Using the Triple Moving Average
Category
Trend
Type
Lagging
The TEMA is a not-so-popular moving average indicator that traders use to identify trends more closely. After developing the Double Exponential Moving Average (DEMA) in 1994, Patrick Mulloy took the concept further and created the Triple Exponential Moving Average.
Like the DEMA, the TEMA overlay utilizes the lag difference between various EMAs to adjust a traditional EMA. The TEMA is used like other MAs. Besides identifying trend direction, it signals short-term pullbacks and trend changes.
The location of the TEMA with the price provides clues to the price direction. When the price is above the TEMA, it confirms that the price of the asset is rising. Conversely, when the price is below the TEMA, it helps confirm that the price is falling.
Apart from that, if the price is above the average and then drops below it, that could signal a reversal of a trend or that the price is entering a pullback phase. On the other hand, if the price is below the average and then moves above it, that could signal the price is rallying.