Triple Exponential Average

Input Information

Name Expression Default Description

Market Synopsis

The three EMA crossover strategy is a trading strategy that uses 3 exponential moving averages of various lengths. All moving averages are lagging technical indicators however when used correctly, can help frame the market for a trader.

Table of Contents

  • Introduction
  • What is the Triple Exponential Average Indicator?
  • The 3 EMA Crossing Strategy
  • How to Use the 3 EMA Cross Strategy in Trading?
  • Advantages of the 3 EMA Cross Strategy
  • Disadvantages of the 3 EMA Cross Strategy

Introduction

Welcome to this article on the triple exponential average (TEMA) indicator and its usage in the 3 EMA crossing strategy. If you’re a trader, you’ve probably come across different types of technical indicators that help you in your trading decisions. The TEMA is one such indicator that has gained popularity among traders over the years.

What is the Triple Exponential Average Indicator?

The Triple Exponential Average (TEMA) is a moving average indicator that uses multiple smoothing techniques to identify trends in the market. Unlike traditional moving averages that use only one value to smooth out the price data, TEMA uses three values, providing more accurate signals about trend changes in the market.

The 3 EMA Crossing Strategy

The 3 EMA Crossing Strategy is a popular trading strategy that uses the TEMA indicator to identify potential buy and sell signals. It involves using two different time frames for the TEMA indicator – a shorter-term TEMA and a longer-term TEMA. The shorter-term TEMA tracks the price action more closely, while the longer-term TEMA provides an overall view of the trend direction.

The strategy involves watching for when the shorter-term TEMA crosses above or below the longer-term TEMA. When the shorter-term TEMA crosses above the longer-term TEMA, it indicates a potential bullish signal, and when the shorter-term TEMA crosses below the longer-term TEMA, it indicates a potential bearish signal.

How to Use the 3 EMA Cross Strategy in Trading?

When using the 3 EMA crossing strategy in trading, traders typically look for confirmation of the signals before entering a trade. This confirmation can be in the form of other technical indicators, price action patterns, or fundamental analysis. It’s also important to manage risk by setting stop-loss orders and taking profits at predetermined levels.

Advantages of the 3 EMA Cross Strategy

  • Easy to understand and implement
  • Provides clear buy and sell signals
  • Works well in trending markets

Disadvantages of the 3 EMA Cross Strategy

  • May provide false signals in choppy or sideways markets
  • Can be slow to react to sudden market changes
  • Requires confirmation from other technical indicators or analysis tools

Table of Contents

  • Introduction
  • What is Triple Exponential Average Indicator (TRIX)?
    • Calculation Methodology
  • Benefits of TRIX
  • Interpretation and Use of TRIX
    • Trend Identification with TRIX
    • Divergence Analysis using TRIX
    • Signal Generation with TRIX
  • Limits to TRIX
  • Conclusion

Triple Exponential Average Indicator (TRIX) is a technical analysis tool used by traders and investors to evaluate the trend of an asset’s price movements. This indicator applies the triple smoothing technique to remove noise from the price data, providing a more accurate picture of the underlying trend.

What is Triple Exponential Average Indicator (TRIX)?

Triple Exponential Average Indicator (TRIX) is a momentum oscillator that measures the rate of change in a security’s price. It was developed by Jack Hutson in the 1980s.

The primary goal of TRIX is to identify the trend of a market by analyzing its rate of change. The oscillator shows how fast prices are rising or falling over a specific period. TRIX generates trading signals when it crosses above or below its moving average.

Calculation Methodology

TRIX calculation involves the following steps:

  1. Calculate the exponential moving average (EMA) for the price data over a specified period, usually 14 or 18 days.
  2. Calculate the first EMA of the EMA calculated in step 1 over the same period.
  3. Calculate the second EMA of the EMA calculated in step 2 over the same period.
  4. Calculate the percentage change between the second and third EMAs to obtain TRIX values.

Benefits of TRIX

TRIX has several benefits, including:

  • It is a reliable trend-following indicator that helps traders spot market trends early.
  • It removes noise from the price data, providing a clearer picture of the underlying trend.
  • It can be used to generate trading signals when it crosses above or below its moving average.
  • It is useful for identifying potential trend reversals and divergences.

Interpretation and Use of TRIX

TRIX can be interpreted in different ways to analyze the market’s trend, divergence, and signal generation. Some of the popular ways include:

Trend Identification with TRIX

TRIX can be used to identify the direction of the market trend. When TRIX is above zero, it indicates an uptrend, and when it’s below zero, it shows a downtrend. A positive slope of TRIX confirms the bullishness of the market, while a negative slope confirms bearishness.

Divergence Analysis using TRIX

Divergence analysis refers to the comparison between price action and a momentum oscillator such as TRIX. Bullish divergence occurs when prices form lower lows, but TRIX forms higher lows. Conversely, bearish divergence happens when prices form higher highs, but TRIX forms lower highs.

Signal Generation with TRIX

TRIX generates trading signals when it crosses above or below its moving average. When TRIX crosses above its moving average, it indicates a bullish signal, and traders can buy the asset. Conversely, when TRIX crosses below its moving average, it shows a bearish signal, and traders can sell the asset.

Limits to TRIX

TRIX is not a perfect indicator and has some limitations. For instance:

  • It can generate false signals in trending markets.
  • It may lag behind price movements, leading to delayed signals.
  • It can be less effective in volatile markets.

Conclusion

Triple Exponential Average Indicator (TRIX) is a momentum oscillator that helps traders and investors identify market trends and generate trading signals. It removes noise from the price data, providing a more accurate picture of the underlying trend. However, like all technical analysis tools, TRIX has some limitations and should be used in conjunction with other indicators and analytical methods to make informed investment decisions.

Table of Contents

Overview

The Triple Exponential Average (TRIX) is a popular technical analysis indicator that is used to identify and confirm trends in financial asset prices. It was developed by Jack Hutson in the 1980s, and its main purpose is to filter out short-term price fluctuations and highlight the underlying trend.

Formula

The TRIX indicator is calculated by applying triple smoothing to the price data over a specified period, which is typically 15 to 30 days. The formula for calculating TRIX is as follows:

TRIX = EMA(EMA(EMA(price, n), n), n) / EMA(EMA(EMA(price, n), n), n-1) – 1

Interpretation

The TRIX indicator generates two types of signals: crossovers and divergences. A crossover occurs when the TRIX line crosses above or below its signal line, which is a nine-day exponential moving average (EMA) of the TRIX line. A bullish crossover is considered a buy signal, while a bearish crossover is considered a sell signal. A divergence occurs when the TRIX line diverges from the price chart, which can indicate a potential trend reversal.

Usage

The TRIX indicator is used by traders and investors to identify and confirm trends in financial asset prices, as well as to generate buy and sell signals. It can be applied to any financial asset that has a price chart, including stocks, bonds, commodities, and currencies.

Advantages

  • TRIX is a reliable trend-following indicator that can filter out short-term price fluctuations and highlight the underlying trend.
  • It is easy to use and interpret, as its signals are clearly defined and easy to identify.
  • It can be applied to any financial asset that has a price chart, making it a versatile tool for traders and investors.

Disadvantages

  • TRIX may give false signals during periods of high volatility, as it is based on smoothing techniques that may not be effective in such conditions.
  • It may also generate delayed signals, as it relies on triple smoothing, which can cause lag.
  • TRIX may not work well in sideways markets, as it is designed to identify and confirm trends.

Table of Contents

Introduction

The Triple Exponential Average (TRIX) is a technical analysis oscillator designed to identify trends in the market. The TRIX indicator is based on the difference between a triple smoothed exponential moving average and a single exponential moving average. The aim of the TRIX indicator is to filter out short-term volatility and highlight the overall trend of the asset price.

Definition of TRIX Indicator

The TRIX indicator is a momentum oscillator that oscillates around a zero line. It is calculated using a triple exponential moving average of the asset price, making it smoother than other moving average indicators. The TRIX indicator is represented as a line on a chart and can be used in conjunction with other technical analysis tools to make trading decisions.

Calculation of TRIX Indicator

The TRIX indicator is calculated by taking the difference between a triple exponential moving average (TEMA) and a single exponential moving average (EMA). TEMA is calculated using three smoothing factors, while EMA is calculated using only one smoothing factor. The formula for calculating TRIX is as follows:

TRIX = 100 * ((EMA(EMA(EMA(close, n), n), n) - EMA(EMA(EMA(close, n), n), n - 1)) / EMA(EMA(EMA(close, n), n), n - 1))

Where:

  • close – the closing price of the asset
  • n – the number of periods used to calculate the TRIX indicator.

Interpretation of TRIX Indicator

The TRIX indicator oscillates around a zero line, with positive values indicating bullish momentum and negative values indicating bearish momentum. A cross above the zero line is considered bullish, while a cross below the zero line is considered bearish. The rate of change of the TRIX indicator can be used to identify potential trend reversals or confirm existing trends.

Advantages of TRIX Indicator

  • The TRIX indicator is less sensitive to short-term market fluctuations, making it more reliable for identifying long-term trends.
  • The TRIX indicator can be used on any asset class, including stocks, commodities, and cryptocurrencies.
  • The TRIX indicator can be used in conjunction with other technical analysis tools to confirm trading signals.

Disadvantages of TRIX Indicator

  • The TRIX indicator may generate false signals in choppy or sideways markets.
  • The TRIX indicator is not suitable for all trading strategies and should be used in conjunction with other indicators to avoid false signals.
  • The TRIX indicator may lag behind changes in market trends, leading to delayed trading signals.

Plot Information

Number Name Default Color Description


Remarks


Indicators

Fundamental Summary

    Coming soon!!

Technical Summary

Related Content

course

Momentum Trading Strategies

course

Trading Strategy : Momentum Trade

course

Introduction to Momentum Trading

course

Tools for trading momentum

course

Momentum Tools