Simple Swing with T3MA
This indicator is based on T3 Moving Average, which was first described in the January 1998 issue of the "Stocks & Commodities" journal in the article "Smoothing Techniques For More Accurate Signals" by Tim Tillson.
The T3 Moving Average was developed in the search for a “perfect” moving average, which would have 2 characterictics:
The smoothness of a filter could be improved by running it through itself multiple times, at the cost of increasing the phase lag. So, we choose a moving average with a very minimal lag (Generalized DEMA), & run it through itself multiple times to get a smoother version with with minimal lag (T3 MA). The problem with multiple runs though these filters increase their tendency to overshoot the data, giving an unusable result. To solve this problem, we need to simply turn down the volume by using a volume factor less than 1. Using a value for v less than 1, & running GDEMA (Generalized DEMA) through itself multiple times we get a new, smoother moving average (T3) that does not overshoot the data:
T3(n) = GDEMA(GDEMA (GDEMA(n)))
Traditionally, the entry is mainly done by crossovers between a fast and a slow moving average (MA). When the fast MA crosses up the slow MA, the trader takes it as a buy signal. Similarly, when the fast MA crosses down the slow MA, we get a sell signal. These traditional signals are lagging.
In the Simple Swing Strategy, we propose the Early Upswing (E0) & Early Downswing (Ex) terminologies. The Early Upswing starts when the T3 ribbon is red (i.e. Fast T3MA is lesser than slow T3MA), but the price has closed above the ribbon. This is the E0 candle. Similarly, the Early Downswing starts when the T3 ribbon is green (i.e. Fast T3MA is greater than slow T3MA), but the price has closed below the ribbon. This is the Ex candle.
Thereafter, the color of the ribbon confirms the swings. When we have the green ribbon, we are in a Confirmed upswing. When we have the red ribbon, we are in a Confirmed downswing.
p.s. It should be noted that the terms “swing” & “trend” are not interchangable. You can have an upswing in a downtrend, & a downswing in an uptrend. An upswing in an uptrend is the most reliable environment for long positions, & vice versa.
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References:
- T3 Average by HPotter (2014)
- T3MA Ribbon by JustUncleL (2017)
The T3 Moving Average was developed in the search for a “perfect” moving average, which would have 2 characterictics:
- Smooth (not sensitive to random noise in the underlying price)
- Would not lag behind the price
The smoothness of a filter could be improved by running it through itself multiple times, at the cost of increasing the phase lag. So, we choose a moving average with a very minimal lag (Generalized DEMA), & run it through itself multiple times to get a smoother version with with minimal lag (T3 MA). The problem with multiple runs though these filters increase their tendency to overshoot the data, giving an unusable result. To solve this problem, we need to simply turn down the volume by using a volume factor less than 1. Using a value for v less than 1, & running GDEMA (Generalized DEMA) through itself multiple times we get a new, smoother moving average (T3) that does not overshoot the data:
T3(n) = GDEMA(GDEMA (GDEMA(n)))
Traditionally, the entry is mainly done by crossovers between a fast and a slow moving average (MA). When the fast MA crosses up the slow MA, the trader takes it as a buy signal. Similarly, when the fast MA crosses down the slow MA, we get a sell signal. These traditional signals are lagging.
In the Simple Swing Strategy, we propose the Early Upswing (E0) & Early Downswing (Ex) terminologies. The Early Upswing starts when the T3 ribbon is red (i.e. Fast T3MA is lesser than slow T3MA), but the price has closed above the ribbon. This is the E0 candle. Similarly, the Early Downswing starts when the T3 ribbon is green (i.e. Fast T3MA is greater than slow T3MA), but the price has closed below the ribbon. This is the Ex candle.
- The long entry (or the short exit) is taken once the price closes above the red ribbon.
- The long exit (or the short entry) is taken once the price closes below the green ribbon.
Thereafter, the color of the ribbon confirms the swings. When we have the green ribbon, we are in a Confirmed upswing. When we have the red ribbon, we are in a Confirmed downswing.
p.s. It should be noted that the terms “swing” & “trend” are not interchangable. You can have an upswing in a downtrend, & a downswing in an uptrend. An upswing in an uptrend is the most reliable environment for long positions, & vice versa.
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References:
- T3 Average by HPotter (2014)
- T3MA Ribbon by JustUncleL (2017)
릴리즈 노트:
Updated to let the user change the colors & transparency of the moving averages & the ribbon. Also includes a “dark mode” toggle for an instant color settings change.