TEMA: Triple Exponential Moving Average Guide

Key Takeaways

• TEMA triple exponential moving average uses the combination 3 * EMA1 - 3 * EMA2 + EMA3, where each EMA is computed on the prior stage.
• The third stage offsets the lag and over-shoot residue left by DEMA, producing a line that sits even closer to current price.
• The most common mistake is using long TEMA lengths the same way you would use long SMAs; TEMA at length n behaves more like a much shorter SMA.
• TEMA appears in short-term trading templates and as the inner building block of several adaptive systems.

What It Is

TEMA is a recursive smoother computed from three EMAs of the same length: one of price, one of that EMA, and one of the second EMA. The output is a fixed linear combination designed to cancel most of the lag the EMAs introduce.

The name describes the construction, not a simple average. TEMA is not the mean of three EMAs. It is a specific formula that uses three EMA stages with coefficients (+3, -3, +1) chosen to project the line forward.

The Intuition

Mulloy's DEMA used 2*EMA1 - EMA2 to estimate and remove the lag of EMA1. The estimate is good but imperfect; EMA2 itself has lag relative to EMA1, so the correction undershoots. Adding a third EMA and a third coefficient lets the formula correct for that residual.

The pattern (+3, -3, +1) is the same family of coefficients that appears in numerical derivative approximations. In effect, TEMA is doing a second-order forward extrapolation of the EMA series, which is why the result sits closer to current price than DEMA at the cost of a slightly noisier line.

How It Works

The published formula, documented by StockCharts, MetaTrader, and TC2000, is:

EMA1 = EMA(price, n)
EMA2 = EMA(EMA1, n)
EMA3 = EMA(EMA2, n)

TEMA = 3 * EMA1 - 3 * EMA2 + EMA3

All three EMAs share the same period n. Standard values are 20 or 14 for daily charts, 9 for intraday templates, and as short as 5 inside indicator chains.

Lag intuition: a plain EMA(n) lags by roughly n/2 bars. DEMA(n) lags by roughly n/4. TEMA(n) lags by roughly n/6 on smooth series, the lowest of the three. The cost climbs in parallel: TEMA is noisier than DEMA, which is noisier than EMA.

Warmup is meaningful. EMA3 depends on EMA2, which depends on EMA1, so the first stable TEMA values do not appear until roughly 3n to 4n bars have passed. Backtests that begin earlier read random startup behavior.

Worked Example

Use n = 5 on five closes: 100, 102, 104, 103, 110. Suppose at the bar where price prints 110, after running enough warmup:

• EMA1 = 105.0
• EMA2 = 103.4
• EMA3 = 102.2

Compute TEMA:

TEMA = 3 * 105.0 - 3 * 103.4 + 102.2
     = 315.0 - 310.2 + 102.2
     = 107.0

Compare on the same data: SMA(5) is 103.8, WMA(5) is 105.2, EMA(5) is 105.0, DEMA(5) is 106.6, TEMA(5) is 107.0. The progression EMA -> DEMA -> TEMA pulls steadily closer to the most recent close of 110. That is the lag-reduction ladder in action.

In live data, the same ordering holds in trends. In chop, the differences shrink and TEMA can flip direction more often than DEMA or EMA because of its noise sensitivity.

Common Mistakes

1. Treating TEMA as an average of three EMAs. It is not. TEMA is a fixed linear combination with coefficients (3, -3, 1), chosen for lag cancellation. Averaging three EMAs makes the line slower, the opposite of TEMA's purpose.

2. Reading TEMA length the same as SMA length. A 20-period TEMA reacts roughly like a 6- or 7-period SMA. If you want SMA-level smoothing, use a much longer TEMA.

3. Ignoring warmup. TEMA needs about 3n to 4n bars to settle. Some platforms display unstable values during that period, which can ruin a backtest start.

4. Combining TEMA with very short EMAs in chains. Stacking TEMA(5) on top of TEMA(5) on top of EMA(3) amplifies noise. Each stage adds responsiveness and reduces the safety margin for whipsaws.

5. Using TEMA as a standalone trade signal. Like DEMA and T3, TEMA is a smoother, not a system. Pair it with a trend filter, a volatility regime, or a confirming indicator before acting on a cross.

Frequently Asked Questions

What is TEMA triple exponential moving average in simple terms? The TEMA triple exponential moving average is a price line that combines three EMA stages to cut lag. It tracks current price more closely than DEMA or a plain EMA of the same length.

How does TEMA affect investment decisions? Active traders use TEMA in place of EMA when they want faster confirmation of entries and exits. Long-term investors rarely use TEMA because the noise that helps short-term reaction hurts at monthly horizons.

What is a real-world example of TEMA use? TEMA is a default indicator in StockCharts, MetaTrader 5, TC2000, MotiveWave, and most professional charting tools. A 14-period or 20-period TEMA on a daily chart of a liquid ETF is a typical setting.

How can investors use TEMA effectively? Match the length to your horizon, expect a faster line than a same-length EMA, and pair it with a longer-term trend filter to avoid trading every noise-driven cross.

How is TEMA different from T3? TEMA uses a single fixed combination of three EMAs (3EMA1 - 3EMA2 + EMA3). T3 chains three generalized DEMA stages and adds a tunable volume factor v that lets the trader pick a point along the lag-noise tradeoff.

Sources

1. StockCharts ChartSchool. "Triple Exponential Moving Average (TEMA)." https://chartschool.stockcharts.com/table-of-contents/technical-indicators-and-overlays/technical-overlays/triple-exponential-moving-average-tema
2. MetaTrader 5 Help. "Triple Exponential Moving Average." https://www.metatrader5.com/en/terminal/help/indicators/trend_indicators/tema
3. TC2000 Help. "Triple Exponential Moving Average (TEMA)." https://help.tc2000.com/m/69445/l/755007-triple-exponential-moving-average-tema
4. MotiveWave Studies. "Triple Exponential Moving Average (TEMA)." https://www.motivewave.com/studies/triple_exponential_moving_average.htm

Disclaimer

This article is educational content only and is not financial advice. Nothing here is a recommendation to buy, sell, or hold any security. Consult a licensed advisor before making investment decisions.