TEMA Archives - Trading Rush

Since the Weighted Moving Average made the Golden Cross Trading Strategy better and gave a relatively consistent profit graph in the long run, can the Triple Exponential Moving Average give the same or even better win rate than the WMA Golden Cross? Actually this time it gets even better because this time I took 200 Trades with the TEMA Golden Cross Strategy. You see, in a normal Golden Cross Trading Strategy, and in the WMA Golden Cross that we have tested before, the stoploss was set below or above the moving average. But since the Triple Exponential Moving Average is faster than both Weighted, and Normal Exponential Moving Averages, the stoploss in the TEMA Golden Cross was sometimes way too close to the entry. So I took 200 trades, 100 with stoploss below or above the moving averages, and 100 trades with stoploss set using the pullbacks of the trend. So in this video, we are not only going to find out if TEMA Golden Cross is better than the WMA Golden Cross, but also how pullback stoploss can affect the win rate and profit graph of a trading strategy.

If you look at the chart, you will notice that there are 3 moving averages instead of 2. In a normal Golden Cross Strategy, we use 50 and 200 moving averages to generate Golden Cross Signals. But the Triple Exponential Moving Average is so quick at reacting to the price movement, that it gives a lot of Golden Crossovers in a short period of time, leading to more false signals. So I had to use a 200-period normal Exponential Moving Average to filter most of those false signals.

As you can see, with the stoploss above or below the moving averages, the profit graph went in the sideways direction at the beginning, but then took a dive and started a downtrend. This is one of the worst profit graphs we have seen so far. The TEMA Golden Cross Strategy did recover some of the loss near the end, but if we take the same trades but by using the pullback stoploss, you will notice that the stoploss is not getting triggered by market noise. The Triple EMA Golden Cross strategy doesn’t give a lot of good quality signals like the Weighted or even the Normal Golden Cross Strategy. However, if we look at the profit graph in the Trading Rush App, we will notice that the profit line with the pullback stoploss no longer looks like a market crash.

The TEMA Golden Cross strategy with the moving average stoploss got an approximate win rate of 37 percent with a 1.5 to 1 reward risk ratio, and the profit graph looked like the profit graph of a confident beginner trader. On the other hand, the TEMA Golden Cross Strategy with pullback stoploss got a 43 percent approximate win rate with a 1.5 to 1 reward risk ratio It didn’t lose money and was not bad as the first one.

3.5+7.4+3.5+0+3.5

The first TEMA Golden Cross with moving average stoploss gets a TR Score of 17.9 out of 50 and ranks 43rd from the top, and 4th from the bottom. Above the MACD zero lag strategy, and below the CCI Trading Strategy.

4.2+7.4+4+2+4.5

On the other hand, the better TEMA Golden Cross with the stoploss above or below the pullback gets a TR Score of 22.1 out of 50, and ranks 35th from the top, below the DEMA Golden Cross Strategy, and above the Awesome Oscillator second strategy.

That’s all.

The TRUTH about TRIPLE EMA you should know (TEMA) – Day Trading Strategies

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Is the Triple EMA really better than the normal Exponential Moving Average? The Triple EMA is very similar to the Double Exponential Moving Average, but as the name says, in the double exponential moving average, you use two Exponential Moving Averages, and in the Triple EMA, you use three Exponential Moving Averages to calculate the values. This results in a faster EMA with less lag.

If you plot a normal 200 Exponential Moving Average, a DEMA, and a Triple Exponential Moving Average at the same time. You can obviously guess that the Triple EMA will be the fastest. However, the fastest Exponential Moving Average doesn’t always have to mean better.

For example, when we talked about the Double Exponential Moving Average, we saw that DEMA was actually better when used as an exit indicator because it reacted to the price faster. But compared to DEMA, the Triple EMA sticks way too close to the price, and when used as an exit indicator, the price will cross it multiple times leading to false early exits. In other words, the DEMA is still the sweet spot between not too fast and not too slow.

But then what’s the point of using a Triple Moving Average? If you look at this chart, you will notice that even though Triple EMA was sticking very close to the price in the trend, when the trend was over, or when the price started to reverse, the Triple EMA was far away from the price. Because of this, the main purpose of the Triple Exponential Moving Average is to smooth out the noise like most moving averages, while reacting to price movements with reduced lag. Remember, just because Triple EMA stays near the price, it is not the same as the faster period normal moving average. However, if you remember, in the Double Exponential Moving Average Video I said, that in a trend, you can achieve the same result as DEMA, by simply using a faster period exponential moving average. With the Triple EMA, that’s not the case. However, a shorter period Double Exponential Moving Average looks very similar to a Triple Exponential Moving Average in a trend.

Well, if that’s the case, is Triple EMA special? If you think the normal exponential moving average is special, then yes! But should you use the Triple EMA over a normal Exponential Moving Average? Many traders like to use a 30 period Triple EMA in a strong trend. In an uptrend, they buy when the candle closes above the 30 Triple Exponential Moving Average. But then again, if you add a normal 9-period Exponential Moving Average on the same chart, you will see the normal EMA reacts pretty much the same way in the strong trend, and even gives faster and better entry signals in many cases. The 9 period Exponential Moving Average Strategy is a widely used Trading Strategy, and even I have made money with it in the past. As you can see, in this case, the 9-period normal Exponential Moving Average Strategy gave a way better entry signal than the 30 period Triple EMA Strategy, and many time gives the same or even better exit signals than the 30 period Triple EMA.

As I said, the Triple EMA reduces lag from the normal Exponential Moving Average, but that doesn’t have to mean good. Many times lag on a moving average is better. Since the Weighted Moving Average actually increased the win rate of the Golden Cross Strategy by reacting to the price movement faster, we will test Triple EMA 100 Times in the next video to see if it can perform better than the Weighted Moving Average, by reacting to price even faster.