The tema is believed to react quicker to price fluctuations than the simple moving average ( sma ), the exponential moving average ( ema ), and the double ema ( dema ). The shorter length tema crossing over the longer one is believed to indicate a bullish trend ahead, highlighted in green. The shorter length crossing below the longer one may indicate a bearish trend is on the way.
It has been found that most traders lose money because they panic early, and don't let profits run. Tema helps me to filter out trading noise, reduce stress and stay in profitable trades longer. Highlighting the candle wicks reveals trends in highs and lows that may be difficult to see otherwise. I like being able to adjust the settings and look back to see how much noise would have been good to filter out.
Things to watch out for.
Like other moving averages, the tema is a lagging indicator, vulnerable to false signals, especially during a large move up or down. Use with other indicators that are better designed for detecting tops and bottoms. Adjust the lengths to filter out what you think may be wrong signals. The settings are subjective, and it depends on the security and the time period. Manually create a note or reminder with your favorite settings for each. You may choose how much price fluctuation to filter out by going into settings, marked with the gear icon.
Unconfirmed sentiment arrow.
Tema draws an arrow of current sentiment, based on the unconfirmed price action of the faster tema. It shows where it thinks prices are presently going, barring other factors. Its main purpose is to extend a line from the end of the tema, so it is not difficult to see. Remember, it is probably wrong until the last bar closes. And even then, buyers or sellers could come along at any moment and change the outlook.
In true TradingView spirit, the author of this script has published it open-source, so traders can understand and verify it. Cheers to the author! You may use it for free, but reuse of this code in a publication is governed by House Rules. You can favorite it to use it on a chart.