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Triple Exponential Moving Average (TEMA)

What TEMA is, how three EMAs are combined to cut lag, its settings on MillionChart and a worked example on gold.

The Triple Exponential Moving Average is a fast moving average: it combines an EMA, the EMA of that EMA and the EMA of that, in a way that cancels most of the lag of a single EMA of the same length. Patrick Mulloy introduced it in "Smoothing Data with Less Lag" (Technical Analysis of Stocks & Commodities, February 1994). It is drawn over the candles in price units.

Triple Exponential Moving Average (9, close) over gold, daily candles
Triple Exponential Moving Average (9, close) over gold, daily candles

What it shows#

  • TEMA — one line over the candles that turns almost as soon as price does. Its slope is the short-term direction; price on the far side of it is a short-term change of side.
  • It can overshoot: after a sharp move the line may run a little beyond where price settles, then come back.
  • The first value appears about three lengths into the history, because the third EMA needs the second to exist first.

How it is calculated#

E1 is an EMA of the Source over the Length; E2 is an EMA of E1 over the same length; E3 is an EMA of E2. Then TEMA = 3 × E1 − 3 × E2 + E3. Each extra smoothing adds lag, and the weighted difference subtracts it back out; the result is smoother than price but much closer to it than E1. Each EMA starts from the simple average of its first N values.

How traders use it#

  • As a fast trend line: long while price closes above a rising TEMA, flat or short while it closes below a falling one.
  • As the fast line of a crossover with a slower average (an EMA 21 or an SMA 50): TEMA crossing up starts the move, crossing down ends it.
  • As an early warning: TEMA bending while price is still making highs says momentum is fading, before a slower average shows it.
  • Watch out: it whipsaws in ranges, and the overshoot can put the line on the wrong side of price for a bar or two after a spike. Confirm with a slower average or with ADX before acting on a crossing.

Settings#

SettingDefaultWhat it changes
Length9The length of each of the three EMAs (1 to 5,000). Larger is smoother and slower; the lag stays small for its length.
SourceCloseThe price it follows: Open, High, Low, Close, Mid (HL2), Typical (HLC3) or Average (OHLC4).
Colours and style—The TEMA line colour.

Example on gold#

Gold has been grinding up for two weeks and the daily TEMA (9) sits just under the candles, around $4,280 while price trades near $4,300. For example, a trader who has been long since $4,200 keeps the position while the daily close stays above the TEMA, and takes a close below it as the first exit signal, because this line turns early.

What would invalidate it as an exit: price closing back above the line the next day with the line turning up again. That is the overshoot at work: a single close through a fast average inside a trend is often just a deep pullback, so size the first exit small.

Add it to your chart#

  1. Click Indicators in the top strip (on the Pro screen, I does the same).
  2. Type tema and click the indicator.
  3. Click its chip in the legend to open the Inspector and change the settings; drag the chip to reorder; the dot hides it; × removes it.