Triangular Moving Average (TMA) bands

The Triangular Moving Average (TMA) bands indicator provides a volatility-based envelope around a smoothed moving average to identify potential reversal points and trend exhaustion in the market.

Usage

The Usage section describes how the script can be used, particularly for identifying mean reversion opportunities. Traders typically look for price interaction with the outer bands to determine entry and exit points.

• Mean Reversion: When the price hits the lower band, it is often interpreted as an oversold condition and a possible buy signal. Conversely, when the price hits the upper band, it suggests an overbought condition and a potential sell signal.
• Take Profit Levels: The middle line (the TMA itself) serves as the first Take Profit (TP1) target. The opposite band serves as the secondary Take Profit (TP2) target.
• Trade Management: A common methodology involves moving the Stop Loss to breakeven once TP1 is reached. If the price continues to TP2, the stop loss can be trailed to the TP1 level to lock in gains.

Details

The script is constructed using a Triangular Moving Average (TMA) as the baseline, which is essentially a doubly smoothed moving average that places more weight on the middle portion of the data series. This results in a much smoother line compared to a Simple Moving Average (SMA).

To create the bands, the indicator incorporates the Average True Range (ATR) to account for market volatility. The upper and lower bands are calculated by adding and subtracting a multiplied ATR value from the TMA. This ensures the bands expand and contract based on recent price action, providing a dynamic boundary for price movement.

Settings

• TMA number of bars back: Sets the lookback period for the Triangular Moving Average calculation. Higher values result in a smoother, slower-reacting baseline.
• ATR number of bars back: Determines the period used to calculate the Average True Range, affecting how the bands react to volatility.
• ATR Multiplier: Adjusts the width of the bands. Increasing this value moves the bands further from the midline, while decreasing it makes the envelope tighter.
• Price: Allows the user to select the source data for the calculation (e.g., Close, Open, High, Low).

FAQ

How do I use the TMA Bands for scalping?

For scalping or intraday trades, users often look for price touches on the outer bands on lower timeframes, using the midline as a quick exit or a place to adjust risk.

Can I change the sensitivity of the bands?

Yes, by adjusting the ATR Multiplier, you can make the bands wider (less sensitive) or narrower (more sensitive) to suit different assets and market conditions.

How can I access the TMA bands?

You can get access on the LuxAlgo Library for charting platforms like TradingView, MetaTrader (MT4/MT5), and NinjaTrader for free.