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Triangular Moving Average (TMA)

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Triangular Moving Average (TMA)

Triangular Moving Average (TMA)

Description

The triangular moving average (also known as the TMA) is similar to other moving averages in that it shows the mean price over a specified number of previous prices. However, the triangular moving average differs from most moving averages in that it is double smoothed (i.e. it is averaged twice). The triangular moving average can be calculated using various input data (prices, volume, or another technical indicator), but is most often calculated using prices. The triangular moving average is usually displayed with the price bars, and is the yellow line in the example chart.

Calculation

  • Description: The triangular moving average (TMA) is a weighted average of the last n prices (P), whose result is equivalent to a double smoothed simple moving average (i.e. calculated twice).
  • Calculation:
        SMA = (P1 + P2 + P3 + P4 + ... + Pn) / n

        TMA = (SMA1 + SMA2 + SMA3 + SMA4 + ... SMAn) / n

Trading Use

As with other moving averages, the triangular moving average can be used to identify a trend by using the slope of the average (or lack of slope in a ranging market). However, due to the additional smoothing, triangular moving averages tend to be smoother, and have more waves, than standard moving averages. Interestingly, triangular moving averages often appear more responsive to direction changes, even though the additional smoothing actually moves the domainant input value to the middle of the input series (which would decrease responsiveness).

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