Introduction to the Triangular MA Indicator
One of the weaknesses of moving average lines is that it is often susceptible to false signals and trend indications whenever the market is too choppy and does not have a clear trend. One way traders would compensate for this is to smoothen out the moving average line. The Triangular MA Indicator is a moving average line indicator which smoothens out the moving average line.
What is the Triangular MA Indicator?
The Triangular MA Indicator or Triangular Moving Average (TMA) Indicator is a trend following technical indicator which is a modified moving average type of indicator.
This type of moving average plots a very smooth line. This creates a moving average line which is very reliable when indicating trend direction. However, it also does exhibit a tendency to lag behind price action.
Technically, traders can still use this moving average line for crossover types of trade signals. However, these trend reversal signals are not as reliable when used as a standalone trade signal. It should be used in confluence with other technical indications.
Where this indicator shine is as a trend direction filter. It is a reliable trend direction indicator which traders can use to filter out trades moving against the trend.
How the Triangular MA Indicator Works?
The Triangular MA Indicator is derived from a Simple Moving Average (SMA). Its algorithm includes an underlying SMA value which it smoothens out to arrive at the Triangular MA value.
The formula it uses is shown below.
TMA = Sum of SMA values / Number of Periods
It then plots the resulting TMA values on the price chart creating the TMA line.
How to use the Triangular MA Indicator for MT4
The Triangular MA Indicator has a few variables and options which can be modified within its indicator settings.
“Length” refers to the number of SMA periods used to calculate for the TMA line.
“Shift” allows users to displace the TMA line forward or back.
“Price” refers to the price point from each bar which would be applied on the TMA formula.
Buy Trade Setup
When to Enter?
Open a buy order as soon as a bullish candle closes above the TMA line in confluence with other trend reversal technical indications.
When to Exit?
Close the trade as soon as price closes below the TMA line.
Sell Trade Setup
When to Enter?
Open a sell order as soon as a bearish candle closes below the TMA line in confluence with other trend reversal technical indications.
When to Exit?
Close the trade as soon as price closes above the TMA line.
Conclusion
Although the example shown above shows how the TMA line could be used as a trend reversal signal indication, it is not the best use for the Triangular MA Indicator. The lag that the TMA line has can often cause traders to open and close trades a little too late. It is best used as a trend direction filter wherein traders would trade only in the trend direction indicated by the TMA line. However, traders who would insist using the TMA line as a trend reversal signal indicator can still profit using this type of technique since it can also produce trades that would result in trends that would run for a long time.
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