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The MACD TEMA indicator is presented as a modification of the standard forex MACD indicator by adding the TEMA moving average as a smoothing of the main indicator calculations. The calculations of this algorithm are aimed at trend trading, that is, its calculations determine the direction and strength of the current trend. MACD TEMA is represented in the lower window of the price chart as two lines: main and signal, which intersect with each other, coloring the distance between them in a certain color. To determine the market trend and open trades during this period, all current values of the indicator should be taken into account.
The choice of trading timeframe and currency pair does not affect the effectiveness of the MACD TEMA indicator.
Input parameters
The MACD TEMA indicator settings have several sections, each of which interacts with the overall functioning of the indicator. Thus, the Input Parameters section is responsible for the technical work, the Colors section for general visualization, and the Levels section for adding signal levels to its window.
-Fast TEMA Period - fast moving average period value of the indicator. The default value is 19.
-Slow TEMA Period - the period for calculating the slow moving average of the indicator. The default value is 39.
-Signal Period - period of the signal line of the indicator. The default value is 9.
-Price - the type of the price to which the indicator calculations are applied. By default, it is set to Close price.
Indicator signals
The algorithm for using the MACD TEMA indicator in trading is very simple. To open a certain trade using the indicator, one should take into account the direction and strength of the current market trend, which in turn is determined by the direction, the intersection of its lines, and the color formed in their interval. If the values indicators characterize the presence of an upward trend, long positions are opened, while short positions are opened during a downward trend. When the trend direction changes, in both cases, trades are closed.
Signal for Buy trades:
- The indicator lines move up, crossing the signal level 0. At the same time, the main line, which has a color with a growth value, is higher than the signal one. The space between them also has a color with a growth value.
A buy trade can be opened immediately upon receipt of such conditions on a signal candle. At this moment, an upward trend is determined in the market. The trade should be closed upon receipt of the opposite conditions from the indicator, namely, when its lines cross again. At this moment, a change in the current trend is possible, which in turn, it will allow considering the opening of new trades.
Signal for Sell trades:
- The indicator lines intersect so that the signal line is higher than the main one, colored with the fall value. Both lines move down, below the signal level, and the distance between them is colored with the fall value.
Upon receipt of such conditions, a sell trade can be opened on a signal candle due to the presence of a downward trend in the current market. This trade and opening a new one should be considered when the direction of the current trend changes, namely, when its lines cross back.
Conclusion
The MACD TEMA indicator is very accurate, but at the same time an easy-to-use trading algorithm, compiled on the basis of the interaction of forex indicators, the effectiveness of which has been proven by time. Before using the indicator on a real deposit, it is recommended to use a demo account, which will allow not only using the indicator correctly, but also to strengthening the trading skills.
