Understanding the Triple Exponential Moving Average (TEMA) for MetaTrader 5

The Triple Exponential Moving Average (TEMA) is a powerful technical indicator that was crafted by Patrick Mulloy and featured in the "Technical Analysis of Stocks & Commodities" magazine.

The way TEMA is calculated is quite similar to the Double Exponential Moving Average (DEMA). Despite its name, the Triple Exponential Moving Average doesn’t quite capture the essence of its algorithm. It’s actually a unique combination of single, double, and triple exponential smoothing averages that results in a smaller lag than any of the individual components.

Traders often opt for TEMA instead of traditional moving averages, as it can effectively smooth price data and even other indicators.

Triple Exponential Moving Average Indicator

How TEMA is Calculated:

The calculation begins by finding the DEMA, followed by determining the error of the price deviation from DEMA:

err(i) = Price(i) - DEMA(Price, N, ii)

In this formula:

err(i) - the current DEMA error;
Price(i) - the current price;
DEMA(Price, N, i) - the current DEMA value based on the Price series over N periods.

Next, we add the value of the exponential average of the error to get the TEMA:

TEMA(i) = DEMA(Price, N, i) + EMA(err, N, i) = DEMA(Price, N, i) + EMA(Price - EMA(Price, N, i), N, i) =
= DEMA(Price, N, i) + EMA(Price - DEMA(Price, N, i), N, i) = 3 * EMA(Price, N, i) - 3 * EMA2(Price, N, i) + EMA3(Price, N, i)

Here’s what the terms mean:

EMA(err, N, i) - the current value of the exponential average of the error;
EMA2(Price, N, i) - the current value of the double sequential price smoothing;
EMA3(Price, N, i) - the current value of the triple sequential price smoothing.

Understanding the Triple Exponential Moving Average (TEMA) for MetaTrader 5

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