#Exponential moving average formula how to
#Exponential moving average formula code

The triple exponential moving average creates a multiple exponential moving average (EMA) of the initial EMA.

#Exponential moving average formula how to

How to calculate a triple exponential moving average Some analysts suggest pairing the TEMA with the moving average convergence divergence (MACD) for market analysis. The triple exponential moving average can be used with other technical indicators or oscillators to better track sharp price movements. In such a sustained trend, it filters market volatility, showing the real direction of the prevailing trend. The triple exponential moving average serves as a trend following indicator. Multiple moving averages are usually employed to help reduce noise in short-term market swings. It was created to help eliminate the persistent issue of lag faced by traders when using other moving average indicators such as the exponential moving average (EMA). The triple exponential moving average, also referred to as TEMA, was developed by Patrick Mulloy in the mid-1990s. There are basically unlimited ways you can use a moving average and your imagination is probably the most restricting factor! What is a triple exponential moving average (TEMA)? However, be aware that this is just one method of testing a moving average. It’s the overall tailwind in the stock market that matters.

Thus, TEMA seems to have little predictive value. What matters is the number of days you stay in the trade.

We have problems extracting much information from our backtests on TEMA except the fact that it seems random if you buy on a crossing of the TEMA either above or below. This is because of the tailwind in the form of inflation and productivity gains. The results from backtesting 3 and 4 look like this (the results are not CAGR, but average gains per trade):Īs expected, the longer you are in the stock market, the better returns you get. In the long run, it is better to use trend-following strategies. This is because, in the short run, the stock market shows tendencies toward mean-reversion. All the other days for the TEMA work better when the close crosses BELOW the average. However, it looks like this result is an outlier. Opposite to many other moving averages, the TEMA performs better on a 5-day average when it breaks ABOVE the average (see table two above). The results of the first two backtests look like this: We use average gain per trade in percent to evaluate performance, not CAGR. Strategy 4: When the close of SPY crosses ABOVE the N-day moving average, we sell after N-days.Strategy 3: When the close of SPY crosses BELOW the N-day moving average, we sell after N-days.We sell when SPY’s closes BELOW the same average. Strategy 2: Opposite, when the close of SPY crosses ABOVE the N-day moving average, we buy SPY at the close.We sell when SPY’s closes ABOVE the same average. Strategy 1: When the close of SPY crosses BELOW the N-day moving average, we buy SPY at the close.

#Exponential moving average formula code

We test on SPDR S&P 500 Trust ETF which has the ticker code SPY.Īll in all, we do four different backtests: We look at the most traded instrument in the world: the S&P 500. It’s nice to know the theory behind the triple exponential moving average, but does it really work? It’s time to backtest and put the theory to the test:ĭoes a triple exponential linear-moving average strategy work? Can you make money by using triple exponential moving average strategies?

Triple Exponential Moving Average TEMA strategy backtest and best settings Triple exponential moving average strategies (TEMA) – takeaways.What are some disadvantages of using TEMA?.What are some advantages of using TEMA?.FAQ Triple exponential moving average (TEMA).Relevant articles about moving averages strategies and backtests.

Drawbacks with a triple exponential moving average.

How can you use a triple exponential moving average?.

How to use a triple exponential moving average.

Why use a triple exponential moving average?.

How to calculate a triple exponential moving average.

What is a triple exponential moving average (TEMA)?.

Triple Exponential Moving Average TEMA strategy backtest and best settings.