How do I set up Triple Exponential Moving Average, and how does it help in trading?
A Triple Exponential Moving Average (TEMA) consists of three Exponential Moving Averages taken for different timeframes and combined into a single average line.
How to calculate a Triple Exponential Moving Average
A triple exponential moving average is calculated by following the algorithm.
- Calculate the MA for a specified timeframe.
- Calculate two EMAs for a specified period, use the MA that you have calculated in the previous step.
- Based on these two EMAs, calculate the third EMA - this is the TEMA you need.
The formula used for the TEMA calculation is the following:
TEMA (i)=3EMA (i) – 3EMA of EMA (i) + EMA of EMA of EMA (i)
- i is the timeframe set by a trader
- EMA (i) is the first EMA
- EMA of EMA (i) is the EMA with double smoothing
- EMA of EMA of EMA (i) is the EMA with triple smoothing
How to use a Triple Exponential Moving Average
Have a look at the screen. The blue line is the short-time TEMA. Depending on the price movements around it, you will get a Buy or a Sell signal.
If the asset price is above the TEMA line, it means that the asset is overbought. Soon, the price may drop back to the indicator value. That’s why it is the best time to sell the asset because later, its price may drop.
When the asset price is above the TEMA, you will receive a Sell signal.
If the asset price moves below the TEMA, it means that the asset is oversold. Soon, its price may start growing and reach the TEMA, and thus, it is the best time to buy the asset.
When the asset price is below the TEMA, you will receive a Buy signal.
The red line is a long-term TEMA.
Depending on its behavior, you will also be getting Buy or Sell signals.
If the green TEMA (short-term TEMA) crosses the red TEMA (long-term TEMA) from below, you will get a Buy signal.
If the green TEMA (short-term TEMA) crosses the red TEMA (long-term TEMA) from above, you will get a Sell signal.
How to set up TEMA
To set up signals based on an TEMA movement, open the Alerts tab.
- Pick the exchange.
- Select the coin pair for which you want to receive alerts.
- In the Select indicator field, pick TEMA - Triple Exponential Moving Average.
- Click on the Set Alert button.
That’s it. Now, you will receive alerts as soon as a Buy or a Sell signal comes.
If you want to change the alert settings, click on the Open Settings button in front of the alert, and implement the required changes.
To delete the alert, click the Delete Signal button in front of the alert you want to delete.