Introduction to the T3 Moving Average Indicator
Most moving average lines tend to either be responsive yet too erratic or smooth yet too lagging. The T3 Moving Average, developed by Tim Tillson, is said to be an improved version of the basic moving average lines as it tends to be smoother yet more responsive at the same time.
What is the T3 Moving Average Indicator?
The T3 Moving Average Indicator is a custom technical indicator which is a modified version of the basic Exponential Moving Average (EMA).
This version of the T3 Moving Average Indicator plots a solid red line on the price chart, which is a characteristically smooth yet responsive moving average line.
How the T3 Moving Average Indicator Works?
The T3 Moving Average uses a different formula compared to most moving average line variations. It derives its computation from a General DEMA (GD), which is somewhat a normalized Double Exponential Moving Average (EMA). The DEMA in turn is also derived from the basic Exponential Moving Average (EMA) line.
It also incorporates a volume factor within its computation which dictates how responsive the moving average line would be to linear trends.
The T3 Moving Average Indicator then plots its moving average line based on its complex formula.
How to use the T3 Moving Average Indicator for MT4
The T3 Moving Average Indicator has a “T3 Period” variable which allows for modifications of the number of bars used in its formula.
It also allows traders to modify its smoothing effect or volume factor using the “b” variable within its indicator settings.
The T3 Moving Average Indicator can be used to identify trend or momentum direction based on where price action generally is in relation to the moving average line, as well as the slope of the moving average line.
It can also be used as a reversal signal based on moving average crossovers with another moving average or with price action.
It could also act as a dynamic support or resistance level where price can reverse from.
Buy Trade Setup
When to Enter?
Add another moving average line to pair with the T3 Moving Average line as a moving average crossover. Open a buy order as soon as the T3 Moving Average line crosses above the other moving average line. Set the stop loss below the moving average lines.
When to Exit?
Close the trade as soon as the T3 Moving Average line crosses below the other moving average line.
Sell Trade Setup
When to Enter?
Add another moving average line to pair with the T3 Moving Average line as a moving average crossover. Open a sell order as soon as the T3 Moving Average line crosses below the other moving average line. Set the stop loss above the moving average lines.
When to Exit?
Close the trade as soon as the T3 Moving Average line crosses above the other moving average line.
Conclusion
The Exponential Moving Average line is a basic attempt to smoothen out a moving average line while improving its responsiveness. The T3 Moving Average takes it a step further by smoothening the moving average line further and making it even more responsive.
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