Investing & Trading

Triangular Moving Average Study

By Samantha Baltodano


TL;DR:

The Triangular Moving Average is a variation of the moving average strategy that calculates the double-smoothed Simple Moving Average. This is otherwise known as the average of the average.


What Is the Triangular Moving Average?

The Triangular Moving Average (TMA) is a technical indicator that is calculated as a double-smoothed Simple Moving Average (SMA) of the price. The double-smoothed SMA is also known as an SMA of SMA or the average of the average. 


TMA is similar to other moving averages except it uses a different weighting scheme. The Exponential Moving Average and the Weighted Moving Average place a greater weight on newer price changes. The SMA places an even weight on all prices in a given period. Because of the double-smoothing, the TMA will apply a greater weight to the middle portion of the data.


Similar to other moving averages, the TMA is able to identify trends and areas of support and resistance. The double-smoothing effect is meant to produce a line that is less responsive to price volatility, but in actuality the TMA appears more responsive to directional changes. The TMA will also appear smoother and have more waves than the SMA.


Source: BarChart.com


How Do You Calculate TMA?


First, calculate the SMA for the given period. The SMA is calculated for an interval being a half of the selected time period. In this example let’s say we’re using a 6-day period.


  • SMA = (P1 + P2+ P3) / 3


Last, calculate the TMA using the SMA over the last 6-day period.


  • TMA = (SMA1 + SMA2 + SMA3 + SMA4 + SMA5 + SMA6) / 6


Summary

  • The TMA indicator calculates the average of the average which moves in smoother and more frequent waves than the SMA.
  • To calculate the TMA, find the sum of SMA values and divide by the number of periods you want to average.
  • The TMA is similar to other moving averages, but uses a different weighting scheme. More weight will be applied to the middle values of the data.


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