The TMA (Triangular Moving Average) is not actually a trend indicator and therefore often gets overlooked by traders who prefer to trade with the trend. However, it does offer quite a bit of value to all traders, as it sheds more light on price action. This being the case, let’s have a look at what this indicator is and how it functions.
The TMA indicator is similar in appearance to Bollinger Bands when viewing them on a chart. You’ll notice a center line, along with two outer bands. These bands are constantly readjusting themselves in an effort to contain the asset price. Where trade signals are supplied is when the price manages to move outside of these bands, either above or below, because this tells you that the momentum of price movement is being exhausted. When this happens, it’s generally safe to assume that a retracement is forthcoming.
The TMA should never be used as your sole indicator for making trade decisions. It simply helps you to identify overbought or oversold conditions, so when paired with an additional indicator it can be quite helpful. When the current price exceeds the top band, the asset is being overbought. When the current price drops below the lower band, the asset is being oversold.
What about the middle line? This line is going to change colors. Within the MT4 chart you will also notice a TMA range. This tells you the exact distance (in pips) that exists between the two bands. This can actually help you to identify a trend as the price moves, especially if the distance between pips is significant when the movement begins. Again, do not rely on this indicator as your sole means of identifying a price trend.
The TMA indicator can be used by novice binary options traders, but it typically takes a bit of time to become completely comfortable with using it. Over time you will eventually come to rely on this indicator just as much as any other. Technical analysis is all about numbers and facts, which is why indicators such as this one are often the key to entering into profitable binary options trades.