TMA (Triangular Moving Average)

TMA (Triangular Moving Average) is a weighted moving average indicator. As all other moving average indicators, it smooths the market noises and shows the market trends more clearly.

To achieve the goals, the indicator filters out the market fluctuations (noises) by averaging the price values of the periods, over which it is calculated. In the process, some extra value (weight) is added to the average prices, as it is done during calculations of all weighted indicators such as EMA, LWMA, and SMMA. But during the TMA indicator's calculation, the volumes of the weight increments are assigned in a triangular pattern: from the first period of all the periods, over which the indicator is calculated, to the middle one, the weight increments' volumes increase lineally; then, from the middle period to the latest one, they decrease lineally. Thus, the middle periods have more importance than the end ones. Besides, all the indicator's data is averaged two times: for the first time, when the MVA values are calculated, and for the second time, when the MVA values are averaged to produce the TMA values. All this results in double smoothing of the market noises and increases the indicator's lagging behind the market prices' changes.

On the following picture, the yellow line of the TMA indicator of 26 periods reacts slower to the market behavior, and its line looks smoother than the lines of the other moving average indicators of the same number of periods.



By employing the TMA indicator, a trader gets a crisp picture of the market behavior and can make informed trading decisions. It is also good to use a TMA indicator in combination with another TMA indicator of a different period length or other than TMA indicators.

Because the TMA indicator uses the historical data for its calculation, it reveals the market trend that has already developed and does not show the future trend. A trader can only suppose that the past trend will continue to develop in the same direction for some time in the future and make appropriate trading decisions.

To apply a TMA indicator to a chart, a trader needs to follow the procedure common to all Marketscope indicators. For more information, see the Add Indicator article.

During the procedure, a trader can customize an indicator by specifying its parameters in the Properties dialog box. For more information, see the Change Indicator Properties article.

The parameters fall into two groups:

• Calculation - the parameters needed to calculate an indicator's prices.
• Style and Appearance - the parameters needed to specify the way an indicator appears on a chart.

The TMA indicator has only one Calculation parameter - Number of periods. The parameter allows to specify the number of periods, over which the indicator is to be calculated. The possible values are from 2 through 1,000. The default value is 14. The smaller the number is, the less market noises the indicator filters, and the faster it reacts to the market price changes. Its line stays closer to the price bars, thus, following the shorter-term market trends and producing less lagging. The greater the number is, the more market noises the indicator filters, and the slower it reacts to the price changes. Its line stays more away from the market price bars, thus, following the longer-term market trends and producing greater lagging behind the market prices. Traders choose the Number of periods parameter's value in accordance with his or hers trading tasks, strategies, and techniques. The commonly used values are 7, 14, 26, and 52.

On the following picture, you can see how indicators with different Number of periods parameter's values look like on a chart:



The parameter is available on the Parameters tab of the TMA Properties dialog box under the Calculation heading.

When a TMA indicator is drawn on a chart, a trader can analyze its behavior and try to predict the beginning of a new market trend or ending of an old one, in other words, determine trend reversal points that can serve as signals for the actions that are similar to those of the MVA indicator.

The TMA indicator's values are calculated automatically using the following formula:

TMA_i =(MVA_i + MVA_i-1 + ... + MVA_i-len+1) / len

len = (N+1)/2

where:
TMA_i - is the TMA value of the period being calculated.
MVA - is the Simple Moving Average value calculated over len number of periods.
N - is the number of periods, over which the indicator is calculated.