Technical analysis has plenty of indicators showing trending conditions or acting as oscillators. The TRIX indicator MT4 together with the TEMA indicator come to complete the list. Moreover, a TRIX Forex indicator acts like an oscillator, while the TEMA indicator shows trending conditions. When used together, TEMA and the TRIX indicator form one of the most powerful combinations in technical analysis.
We all know trend indicators appear on the actual chart. And, oscillators appear at the bottom of a chart, in a separate window.
Therefore, one trend indicator and one oscillator won’t make the chart too crowded. But, what if I told you these two indicators complete themselves in offering great trades?
Or, to be more exact, great trading opportunities? With this article, we’ll build a logical approach to trading with the TRIX indicator. Moreover, well see how the TEMA indicator comes to complete the TRIX Forex one.
In doing that, we’ll cover:
- What is the TEMA indicator?
- Different ways to use the triple exponential moving average indicator MT4
- What is the TRIX indicator MT4?
- Different ways to use the TRIX indicator
- The power of the TRIX Forex indicator combined with TEMA indicator
- How to filter fake signals
The aim is to explain the two indicators first. Next, to show how traders use them separately. Finally, to use them together.
Because when used together they show an almost complete scenario. They complement each other in such a way that it is virtually impossible to end on the wrong side of the market.
What is the TEMA Indicator?
TEMA stands for Triple Exponential Moving Average. Patrick G. Mulloy developed it in 1994, after previous efforts in the same direction.
He “played” for years with the DEMA (double) concept, only to realize the triple one works better. The main idea behind the TEMA indicator is to reduce the lag of a traditional EMA (Exponential Moving Average).
One of the greatest Mulloy’s discoveries was that by modifying the MACD (Moving Average Convergence Divergence) with the TEMA indicator, the lag almost disappears. As such, the MACD gave better results.
He used that idea and filtered the TEMA indicator, making it as we know it today. At its very core, the TEMA indicator is a moving average.
Or, better said, a moving average of moving averages. Because of that, traders will get better results using it than when using a classic moving average.
Triple Exponential Moving Average Indicator Formula
Before looking at how to trade with the TEMA indicator, we must understand what it is. Here’s its formula:
(3 * EMA) – (3 * EMA of EMA) + EMA of EMA of EMA)
Of course, the EMA represents the n-day exponential moving average. Sounds complicated?
Well, it is a bit. But, as traders, what matters most is to know how to use an indicator. Not it’s actual calculation.
In plain English, the above formula tells us that the TEMA indicator considers three different EMA’s: a single, a double and a triple one. That’s all that is!
As a custom indicator, the TEMA indicator doesn’t appear in many trading platforms. When using the MetaTrader4, only download the indicator on your PC. Next, paste it in the Indicators file where the platform folders are saved.
Finally, close the MetaTrader platform. And, reopen it. It is the only way to find the indicator under the Custom Indicators tab.
Otherwise, you won’t be able to find it. Just click and drag it on a chart and you’re done with applying it.
Different Ways to Use the Triple Exponential Moving Average Indicator MT4
Being a moving average indicator, the period considered is crucial. As such, the TEMA indicator’s period will make it closer to the price or not.
Remember the interpretation of a moving average? It offers support and resistance levels.
And, the bigger the period is, the stronger the support/resistance level becomes. The TEMA shows the same thing.
But, it stays closer to the price than a Simple Moving Average (SMA) indicator.
A rule of thumb says that the smaller the period considered, the closer the TEMA indicator will be to the price. The opposite is true as well.
Editing the tema indicator is easy. Only look for the period and change it accordingly.
Most of the traders consider the close price of a candle. But, other options exist too.
One can use the opening price, for instance. However, the closing price offers a more accurate information.
The Standard Interpretation of the TEMA Indicator
Like any moving average, the TEMA indicator splits the market into two parts. When the price is above the average, bullish conditions appear.
Or, when it is below, bears are in control. But, there’s a catch.
This is valid if the moving average considers a bigger period. Like the golden and death crosses, the MA’s used there consider many candles.
We won’t cover here golden, and death crosses with the TEMA indicator. If you know how to use them from the classic MA’s, then simply follow the same rules.
Our focus lies on different ways to use the TEMA indicator. Like, for instance, to use it for a shorter period. And, in conjunction with another MA.
Crosses with the TEMA Indicator
An interesting way to trade is to use the TEMA indicator together with another MA. In this case, with a simple moving average (SMA).
Check the chart below. It shows the TEMA indicator (the blue line) and the SMA on the EURUSD current four-hour timeframe.
Two things strike the eye:
- Both averages come close to the actual price
- They consider the same period.
More precisely, both consider fourteen periods. Namely, before plotting a value, they look at the closing price of the previous fourteen candles.
The have different values. The tema indicator comes closer to the actual price than the SMA.
See how the lag disappeared?
So what, you might say? Well, because of this lag difference, we can trade their crosses.
Just like the earlier chart shows, the recent price action in the EURUSD offered plenty of good trades. Only use the cross between the two as an entry.
However, the market gives many fake signals. Can we filter them somehow?
Yes, we can. As always, the volume indicator has the right answer.
Filtering Fake Signals with the Volume Indicator
While volume in the Forex market is a tricky concept, the volume indicator has many uses. One of them is to filter trading setups.
Or, false signals. In our case, we use it to check abnormal spikes in volume.
If we see some, it marks the end of a trade. Or, confirms the new cross between the TEMA indicator and the same period SMA.
From left to right, let’s interpret the chart above. Or, let’s see how to use the volume to filter the TEMA indicator’s signals.
The first bearish cross calls for a short trade. That’s clear.
But, how long to keep the trade? Is there a way to find out earlier that the market will turn?
Here comes the volume in the discussion. Look for abnormal volume.
The first spike higher in volume comes with a high, green, bullish candle. That’s a sign bulls step in. As such, traders exit the short. And, go long on the next bullish cross.
The other spikes in volume confirm the theory. Therefore:
- Use the TEMA indicator’s cross with the SMA for buying or selling
- Stay short/long when the volume is low. Only use the crosses.
- Exit early when there’s an unusual spike in volume.
What is the TRIX Indicator?
Above all, it is an oscillator. As such, the trading platform will display it at the bottom of a chart.
Just like the TEMA indicator, the TRIX Forex indicator is a custom one. You need to import the TRIX indicator MT4 before using it. Simply follow the same steps as the ones mentioned earlier.
Despite being an oscillator, the TRIX indicator solves the same issues as the TEMA indicator. Only that, its interpretation differs.
Because they address the same thing (reducing the lag), using them together is only logical. But, before doing that, let’s see more details about the TRIX Forex indicator.
The TRIX indicator is an oscillator like any other one. However, instead of showing overbought and oversold levels, it shows something else: bullish and bearish markets.
As such, it gravitates before the zero level. Values above zero show bullish conditions. And, of course, values below zero indicate bearish ones.
The TRIX Indicator MT4 and the Zero Level
The TRIX Forex indicator’s first interpretation lies with the zero level. But, that value is not implicitly on the chart.
Or, on the oscillator’s chart. As such, we need to add it.
That’s very simple. First, attach the oscillator to a chart. Second, open the Edit tool. Finally, add the zero level.
Even simpler, just take a horizontal line and place it on the zero level. Above zero means bullish. And, below zero means bearish. It’s that easy!
Here’s the recent GBPUSD four-hour chart. Positive values for the TRIX indicator shows rising momentum. Or, bullish.
On the other hand, negative momentum forms when the TRIX indicator MT4 falls below the zero level.
From left to right, the first cross shows bullish potential. Great place to go long!
Next, the TRIX Forex indicator dips below zero. Together with it, the price dips too. And, it continues to move lower until the TRIX indicator reverses.
As trends differ, the TRIX indicator mt4 doesn’t. It’ll stay elevated as long as the market rises. Or, it’ll dip together with the market.
But is there a way to further trade with it? One answer comes from the other way to use an oscillator: look for divergences.
Bullish and Bearish Divergences with the TRIX Forex Indicator
The TRIX indicator mt4 offers great opportunities to spot divergences. Remember what a divergence is?
It shows the oscillator and the price doing different things. Or, having different paths.
As such, one lies. Typically, that’s the price.
When a divergence occurs, it is time to exit the previous trade. And, to look for the TRIX Forex indicator to cross the zero level. That’s the signal for a new trade.
Let’s have a look at the previous GBPUSD chart. Is there a divergence to spot?
The answer is yes. Right after the first bearish move below zero, the TRIX indicator makes a bullish divergence with the price.
If short, exit and prepare to go long. Aggressive traders will go long right after the TRIX Forex indicator divergence ends.
However, conservative traders will wait for the TRIX indicator to move above zero. In both cases, the trend that followed the divergence was much stronger than the previous ones.
While not a rule of thumb, typically divergences signals an aggressive trend will start. That’s a powerful way to use the TRIX oscillator.
But, is that all? No!
The idea of this article is to combine the power of the TEMA indicator with the accuracy of the TRIX indicator mt4. Together, they make one of the most powerful trading concepts in the modern technical analysis.
TEMA and the TRIX Indicator – A Powerful Trading Setup
How about combining the advantages of the TRIX indicator MT4 with the ones offered by the TEMA indicator? The result will blow your mind.
Here’s the same GBPUSD chart. Only that this time we’ll apply the TEMA indicator too.
We want to filter the TRIX Forex indicator’s crosses with the zero level. In doing that, we’ll use the TEMA indicator.
But, let’s consider a classic SMA. What is the one SMA that offers the strongest support/resistance level? That’s the SMA(200).
As such, we’ll use the two-hundred period for the TEMA indicator too. When the price breaks below TEMA(200), we’ll check the TRIX indicator.
On confirmation, the cross is valid. If not, is fake, and an opposite trade appears when price crosses back.
Right on the left of the chart that’s a fake move. Here’s why.
First, the TRIX Forex indicator breaks above zero. The price is already above the TEMA indicator. These are bullish conditions.
Second, the price dips. And, closes below the TEMA(200).
Is that a bearish cross? No. How come?
The TRIX indicator mt4 doesn’t confirm the bearish cross. It still shows positive values. It didn’t cross the zero level.
Third, traders wait for the price to pop above the TEMA(200). They go long on the move.
Finally, they keep adding as the TEMA indicator should act as support. This approach gives further two trades.
After the bullish divergence, traders wait for two things. First, the price to break above the TEMA(200) line.
Second, the TRIX indicator to move above zero. That’s the confirmation.
From that moment on, only buy on support. And, as long as the price stays above the TEMA indicator, the TRIX MT4 will stay positive.
So, simply ride the trend. That’s how powerful this combination is!
Advantages of Using the TEMA and TRIX MT4 Indicators
The previous GBPUSD example speaks for itself. What’s even more important, is its implication.
Think of it for a second. It shows one currency pair and one-time frame.
But, the setup is the same. It can be applied on any currency pair. And, any time frame.
Traders only must calibrate their expectations. As such, the bigger the time frame, the stronger the trend’s movements. And, the support/resistance levels.
Or, the lower the time frames, the smaller the moves will be. And, the signals will appear more often.
As with many things in life and trading, keeping it simple works best. That’s the biggest advantage of using the TRIX indicator, together with TEMA.
The setup is:
- Simple to understand
- Easy to use
- Offers fabulous trades for the disciplined trader
Therefore, anyone can use it.
Divergences with the TRIX indicator won’t appear often. But, when they do, they have substantial implications.
If we could compare a TRIX indicator MT4 divergence with the RSI, the TRIX one would be more powerful. Just offering a bit of
The TRIX indicator is one of the most powerful trading oscillators. While easy to understand, it provides terrific trades.
Moreover, when combined with the TEMA indicator, the setup becomes even more powerful. Signals are filtered, and traders remain only with the accurate ones.
The triple exponential moving average indicator offers a clear market representation. If bullish, the price action will evolve above the TEMA line. If bearish, below.
With the TRIX indicator MT4 coming to confirm the TEMA movement, disciplined traders use the information to enter and exit a trade. As a result, the performance of a trading account rises.
Knowledge is a priceless gift. And, in the field of technical analysis, there’s always something new to appear.
The TEMA indicator as we know it today was invented in the late 90’s. We learned to use it afterward.
As such, expect more and more indicators to appear, as traders strive to improve the way they approach the market. In return, the market will change too.
If it shows the human nature, with all its good and bad ones (greed and fear), it’ll show the changes in traders’ behavior. Therefore, we, as traders, must always be able to adapt, to make it in this world.
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