Triple Exponential Moving Average (TEMA)
Definition of 'Triple Exponential Moving Average (TEMA)'
The TEMA is often used in conjunction with other technical indicators, such as the moving average convergence divergence (MACD) and the relative strength index (RSI), to confirm trends and identify potential trading opportunities.
The TEMA is a versatile indicator that can be used in a variety of trading strategies. It can be used to identify long-term trends, short-term trends, and trading opportunities.
To calculate the TEMA, you will need to first calculate the exponentially weighted moving average (EWMA) of the price. The EWMA is calculated by taking the current price and multiplying it by a weighting factor, then adding that product to the previous value of the EWMA, and then dividing the result by 1 plus the weighting factor. The weighting factor is typically between 0 and 1, and it determines how quickly the EWMA reacts to changes in price.
Once you have calculated the EWMA, you can then calculate the TEMA by taking the exponentially weighted moving average of the EWMA. The weighting factor for the TEMA is typically the same as the weighting factor for the EWMA, but it can be different.
The TEMA is a versatile indicator that can be used in a variety of trading strategies. It can be used to identify long-term trends, short-term trends, and trading opportunities. However, it is important to remember that the TEMA is a lagging indicator, which means that it will lag behind the actual price action. This means that it is not always the best indicator to use for short-term trading.
The TEMA is a useful tool for technical analysis, but it is important to remember that it is not a perfect indicator. It is important to use the TEMA in conjunction with other technical indicators and to understand its limitations before using it to make trading decisions.
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