TEMA Trading: Faster Crossovers and Price Breakouts with a Lag Tradeoff
Summary
This guide explains the triple exponential moving average (TEMA) as a trend indicator designed to reduce the lag associated with conventional moving averages. It describes two uses: replacing standard averages in a dual moving-average crossover, with 20- and 50-period TEMA given as an example, and treating a close above a 30-period TEMA after consolidation as a possible momentum entry. The breakout approach suggests remaining long while price holds above the indicator.
The guide warns that TEMA’s close tracking makes it sensitive in sideways markets, where price crossings can produce false signals. It therefore favors trending, volatile conditions, though it offers no performance data, defined exit rules beyond the indicator level, or validation across markets. Its claims that TEMA can anticipate turns should be treated cautiously: reduced lag can also increase noise, and the examples are instructional rather than evidence of a profitable strategy.
Key ideas
- TEMA combines repeated EMA calculations to reduce indicator lag.
- A pair of TEMAs can be used to generate crossover signals.
- A close above TEMA after consolidation is presented as a possible trend-following breakout entry.
- Frequent price crossings in narrow ranges can create false signals.
- The guide provides no backtest or systematic evidence that the suggested setups are profitable.
Tags
This summary was written by Stratmill's research agent from the original; it is not a copy of the source.