Triple Exponential Moving Average (TEMA)
Triple Exponential Moving Average (TEMA) is another smoother and faster version developed by Patrick G. Mulloy in 1994.
Again, the idea of the TEMA indicator is to not just take the successive EMA of EMA iteration, but to eliminate the lagging factor present in a traditional EMA.
DEMA indicator formula
The Triple Exponential Moving Average (TEMA) combines a single EMA, a double EMA and a triple EMA, providing a lower lag than either of those three averages.
Trading with TEMA indicator
Trading with TEMA is similar to trading with DEMA indicator.
You can substitute your regular EMA with TEMA, or you can test crossover signals when using two TEMA indicators.
This special candlestick indicator is trend following in nature. It draws bullish and bearish candlesticks on any currency chart. This is a great indicator to find lower-risk price entries in an existing trend. Trading Signals Buy: Wait for the first green candlestick. Sell: Wait for the first pink candlestick. Use in conjunction with other trading indicators. Indicator Preferences Currency pairs: anyPreferred Time frames: anySessions: Any Configurable Indicator Options Colors GBP/USD 1 Hour Chart Example
The Trix indicator is nothing more than a triple exponential moving average indicator. Whilst simple in its basis the actual calculation is quite clever as it “the log of the price input over the period of time specified by the length input for the current bar. The current bar’s value is subtracted by the previous bar’s value. This prevents cycles that are shorter than the period defined by length input from being considered by the indicator” (Investopedia 2010). TRIX oscillates around a zero line so like most oscillating indicators a positive value indicates an overbought market and a negative value indicates an oversold market. Thus whenthe TRIX crosses above the zero line it gives a buy signal, and when it closes below the zero line, it gives a sell signal. You can also use divergences between price and TRIX to make your trading decisions. As you can see in the chart below you can apply a signal line to the TRIX indicator for metatrader. This will also allow you to use crossovers of the two lines and entries or exits. As always though but applying a signal line to an indicator you start to “create” signals where signals may not really be there. Naturally it will be up to the individual if they want to use a signal line but sometimes it can be over kill. Filtering a filter ultimately can make you see things that are just not there. Further, the TRIX indicator is considered to be one of the more leading indicators and by applying an average of an average you are pretty much slowing it down to become more lagging. But as always it is up to the individual trader. If you don’t want to use a signal just set the signal line to 1 in the MT4 properties of the TRIX indicator. This indicator has been used as a forex indicator more recently but I have seen it used on US indicies (like the Russell or E-mini and Dow contracts) more in my time on forex forums. But again with all these indicators you can use them how you wish.
The “Stochastics” indicator is a popular member of the “Oscillator” family of technical indicators. George Lane created the Stochastics oscillator when he observed that, as markets reach a peak, the closing prices tend to approach the daily highs, and vice-versa. The Stochastics indicator is said to be “leading” since it generates signals before they appear in pricing behavior. Traders use the indicator to determine overbought and oversold conditions and the beginnings and endings of cycles in the forex market. The Stochastics indicator is classified as an “oscillator” since the values fluctuate between zero and “100”. The indicator chart typically has lines drawn at both the “20” and “80” values as warning signals. Values exceeding “80” are interpreted as a strong overbought condition, or “selling” signal, and if the curve dips below “20”, a strong oversold condition, or “buying” signal, is generated. STOCHASTICS FORMULAThe Stochastics indicator is common on Metatrader4 trading software, and the calculation formula sequence involves these straightforward steps: 1. Stochastics consist of two lines formed by “%K” and “%D”;2. Choose a period “N” for “%K”, “X” for %D (Standard settings = 9,3);3. %K = 100 * (CCL – LN)/(HN – LN) where CCL = Current Closing Price, LN = lowest low of past “N” periods, HN = highest high of past “N” periods;4. %D = 100 * (HX /LX) where HX = X-period sum of (CCL – LN), LX = X-period sum of (HN – LN). Software programs perform the necessary computational work and produce a Stochastics indicator as displayed by the two lines in the bottom portion of the following chart: The Stochastics indicator is composed of two fluctuating curves – the “Green” %K line, and the “Red” %D signal line. Forex traders prefer a slower version of this indicator because they believe the signals are more accurate. For Slow Stochastics, %K becomes the old %D line, and the new %D is derived from the new %K. The chart above is the slower version, a setting selection on the Metatrader platform. The Stochastics oscillator is viewed as a “leading” indicator, in that its signals foretell that a change in trend is imminent, especially when lines cross into extreme regions. The weakness in the indicator is that it is difficult to discern how long in advance the signal truly is. HOW TO READ A STOCHASTICS CHART The Slow Stochastics oscillator with settings of “9, 3, 3” is presented on the bottom portion of the above “15 Minute” chart for the “AUD/USD” currency pair. In the example above, the “Green” line is the Stochastics “%K” value, while the “Red” line represents the “%D” signal line that acts like a moving average. Stochastics values below 20 and over 80 are worthy of attention. THE STOCHASTICS ROLLERCOASTERThe key points of reference are highpoints, lowpoints, divergences, and occasionally crossovers. The slow “Stochastics Rollercoaster” tends to be more sensitive and is favored by forex traders. The Stochastics oscillator attempts to convey pricing momentum direction changes. Typical “oversold” and “overbought” conditions are noted on the chart, and line crossings confirm these trading signals. Divergences are also important as seen in the noted “overbought” condition. Prices are reaching new highs, but the Stochastics are already receding from previous highs, a sign to sell or short. As with any technical indicator, a Stochastics chart will never be 100% correct. False signals can occur, but the positive signals are consistent enough to give a forex trader an “edge”. Skill in interpreting and understanding Stochastics signals must be developed over time, and complementing the Stochastics tool with another indicator is always recommended for further confirmation of potential trend changes. In the next article on the Stochastics indicator, we will put all of this information together to illustrate a simple trading system using this Stochastics oscillator.