Introduction to the Triangular Moving Average
Moving average lines are some of the most widely used technical indicators used for identifying trends, trend reversals, and dynamic support and resistance levels. However, most moving average lines have weaknesses which could either be that it is too lagging or that it moves too erratically. The TMA line was developed with the goal of having smoothened out moving average line which moves less erratically compared to other moving average lines.
What is the Triangular Moving Average Indicator?
The Triangular Moving Average (TMA) Indicator is a moving average type of technical indicator. In fact, it is quite similar to most moving averages. Where it differs is in its smoothing effect as the Triangular Moving Average was developed with the goal of having a smooth moving average line. The TMA line is double smoothed, which means that the moving average line it plots has been smoothened or averaged out a couple of times.
How the Triangular Moving Average Indicator Works?
As mentioned above, the Triangular Moving Average has a double smoothed formula, which simply means that it has been averaged out twice. It simply computes for multiple Simple Moving Average (SMA) lines, then averages out the SMAs for the past n periods.
TMA = (SMA1 + SMA2 + … + SMAn) / n
In effect, this indicator simply plots a moving average of the moving average of price.
How to use the Triangular Moving Average Indicator for MT5
Standard Triangular Moving Average (TMA) indicators have only one variable, which would be the number of periods in which the moving average would be based on. However, this version allows for a couple more options to allow users to tweak the indicator further.
“Smoothing Depth” allows users to modify the number of periods of SMAs that would be computed by the indicator.
“Horizontal shift of the indicator in bars” allows users to shift the TMA line forward or back.
“Vertical shift of the indicator in points” allows users to shift the TMA line up and down.
The TMA line can be used the same way as most moving average lines are used.
It can be used as a trend direction filter based on price action in relation to the line.
It can be used as a component of a moving average crossover pair for identifying trend reversals.
It can also be used as a dynamic support and resistance line where price can reverse from.
Buy Trade Setup
When to Enter?
Identify an uptrend market and wait for a pullback towards the TMA line. Open a buy order as soon as price action develops a bullish reversal candlestick pattern on the TMA line. Set the stop loss on the support below the entry candle.
When to Exit?
Close the trade as soon as price action shows signs of a bearish reversal.
Sell Trade Setup
When to Enter?
Identify a downtrend market and wait for a pullback towards the TMA line. Open a sell order as soon as price action develops a bearish reversal candlestick pattern on the TMA line. Set the stop loss on the resistance above the entry candle.
When to Exit?
Close the trade as soon as price action shows signs of a bullish reversal.
The TMA line is a smoothened out moving average line. As such, it can be a more reliable moving average line compared to other overly sensitive moving average lines. Its disadvantage on the other hand is that it could also be too lagging due to its double smoothing approach.
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