Triangular Moving Average (TMA)
Triangular Moving Average (TMA) re-averages a simple moving average to make it even smoother.
Contents
Formula
TMA averages price data twice unlike other moving averages which perform this action only once. That is TMA is the averaged value of the average price:
<math> \operatorname{TMA}(price, N)_i = \dfrac{{\sum_{j=i-N+1}^N} {SMA_{j}}}{N} </math>
where:
<math> \operatorname{SMA} </math> is a simple moving average.
<math> \operatorname{N} </math> is the number of periods for the moving average.
Usage
The additional averaging used in TMA gives the effect of a very smooth moving average line. For comparison, look at the chart below.
In Place of Simple Moving Average
TMA can be used exactly in the same way as a simple moving average. For example, you can use it to identify a trend.
Limitations
The major disadvantage of TMA is the same as for other moving averages. This is its inertness. TMA is a lagging indicator, it is always behind the price.
However, sometimes TMA can respond to price changes faster than, for example, a simple moving average. This is because TMA produces a smoother and more wave-like line than a simple moving average.
See Also
Indicators
- Simple Moving Average (MVA, SMA)
- Exponential Moving Average (EMA)
- Linear Weighted Moving Average (LWMA)
Articles
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