Technical Indicators
Triple Exponential Moving Average
The Triple Exponential Moving Average (or TEMA) is an original price smoothing indicator developed by Patrick Mulloy and presented in January 1994 in the magazine Technical Analysis of Stocks & Commodities.
As P. Mulloy states in this magazine, classic Moving Averages have the disadvantage of a reactivity lag that grows with the chosen period. His solution is a modified version of smoothing using the "Exponential Moving Average" which significantly improves responsiveness to price changes.
TEMA is an acronym for "Triple Exponential Moving Average". However, the name of this smoothing method can be confusing because it is not just a Moving Average of a Moving Average of a Moving Average. In reality, it is the mixing of a simple, double, and triple Exponential Moving Averages that achieves this result.
Calculation Method
TEMA = 3*EMA(closing price, P) - 3*EMA(EMA(closing price, P), P) + EMA(EMA(EMA(closing price, P), P), P)
where:
- P: the period
- EMA(closing price, P): the Exponential Moving Average of closing prices over period P
- EMA(EMA(closing price, P), P): the Exponential Moving Average of the previous Moving Average over period P
- EMA(EMA(EMA(closing price, P), P), P): the Exponential Moving Average of the previous double Moving Average over period P
Example
