Triple Exponential Moving Average (TEMA)
Last updated
Last updated
The Triple Exponential Moving Average (TEMA) is a technical indicator designed to smooth price data more effectively than traditional moving averages while also reducing lag. It was introduced by Patrick Mulloy in 1994 and combines single, double, and triple exponential moving averages into one line to provide a faster and more responsive average.
TEMA is particularly useful for traders who want to catch trends early but avoid the noise of minor market fluctuations.
Unlike a simple or exponential moving average, TEMA is calculated using a more advanced formula that combines multiple layers of EMAs:
Where:
EMA1 is the EMA of the price
EMA2 is the EMA of EMA1
EMA3 is the EMA of EMA2
This construction effectively cancels out much of the lag typical in regular EMAs, offering a smoother and more accurate representation of price trends.
TEMA behaves similarly to other trend-following moving averages:
Price above TEMA = bullish bias
Price below TEMA = bearish bias
Crossovers of price and TEMA or between different TEMAs can be used as entry or exit signals.
Because of its low lag, TEMA tends to react faster than standard EMAs or SMAs, making it suitable for active traders who need quick responses.
There’s no one-size-fits-all setting for TEMA, but here are some common configurations:
Short-term trading: 9 or 14 periods
Medium-term trading: 21 periods
Long-term trading: 50 or 100 periods
Always backtest different periods to find the most effective for your asset and timeframe.
Example Strategy: Trend Following with TEMA
Use TEMA (21) as your primary trend line.
When the price crosses above the TEMA and stays there with higher highs — consider entering a long position.
When the price crosses below the TEMA and forms lower lows — consider going short.
Add a momentum oscillator like RSI to confirm entries and avoid false breakouts.
Bonus Tip: Combine TEMA with slower EMAs to create a crossover system (e.g., TEMA 21 crossing EMA 50 = potential trend shift).
Overreacting to noise: Even though TEMA reduces lag, it can still react to minor price spikes. Combine it with other indicators for confirmation.
Using the same settings across all markets: Volatile assets may require shorter periods; stable markets may need longer ones.
Ignoring market context: TEMA is best used in trending environments. Avoid relying on it alone during choppy, sideways markets.
TEMA is a powerful tool for traders looking to reduce lag and stay ahead of trend changes. While it shouldn't be used in isolation, its responsiveness makes it an excellent addition to modern trading strategies.
Combine it with momentum indicators, risk management, and proper backtesting, and you’ll unlock its full potential in any market environment.
