What is your understanding of the TRIMA indicator?
TRIANGULAR MOVING AVERAGE INDICATOR (TRIMA)
This is a weighted moving average indicator that eliminates the noise the market and makes obvious the direction of price movement. The noise in the market is filtered by finding the mean of the price values for the periods under consideration. In the process of this computation, some additional value is added to the mean prices which is common to the calculations of all other forms of moving averages such as EMA, SMA and TREMA. However, the volumes of the weight increments are assigned in a triangular pattern during the calculation of the TRIMA indicator: from the first to the middle period of all the periods over which the indicator is calculated, the weight increments' volumes increase lineally; then, from the middle to the latest period, they decrease lineally. As a result, the intermediate periods are more significant than the end periods. Furthermore, all data for the indicator is averaged twice: once when the moving average values are computed, and again when the moving average values are averaged to produce the TRIMA values. All of this leads to a double smoothing of market noises and an increase in the indicator's lag behind changes in market prices.
This is to say that TRIMA delays in giving signals but gives the best signals when the noise of the market is over and the market clearly gives a trend. This helps traders who trade by following the trend to have a good position to enter and exit the market.
Setup a crypto chart with TRIMA. How is the calculation of TRIMA done? Give an illustration. (Screenshots required).
The addition of TRIMA can be added to a chart by following these steps using tradingview site or software application.
- Launch the tradingview
- Locate the chat of any cryptocurrency asset.
- Click indicator's icon and search for the TRIMA
- Click on it to add it.
Calculation of TRIMA
Triangular moving average is a weighted mean of the n Prices at the end whose outcome is same as double smoothed simple moving average. Thus the formula for the calculation of TRIMA can be gotten from that of SMA. This is to say that, TRIMA can only be computed after SMA has been gotten.
Therefore,
SMA = (P1 + P2 + P3 + P4 + P5+P6+P7... + Pn) / n
Where;
P1-7 = Price of the asset for each of the 7 periods used in the calculation
Pn = Price of the last period used in the calculation.
n = the total number periods used in the calculation.
One can now compute the TRIMA by adding up the values gotten from the calculation of each SMA and divide all by the total periods used in the calculation.
TRIMA = (SMA1 +SMA2 + SMA3 + SMA4 +SMA5 + SMA6 +SMA7... +SMAn)/n
Identify uptrend and downtrend market conditions using TRIMA on separate charts.
The TRIMA behave in the same fashion when compared with TEMA in identifying uptrends and downtrend market conditions. It is easy to know the trend of the market using TRIMA.
When an asset is trending, depending on what a trader wants to do, a decision can be taken with the help of this indicator. The position of TRIMA in a cryptocurrency chart determines the direction of the trend.
When TRIMA is below the price of an asset, the asset is in an uptrend. At this time, no matter how the price falls, it doesn't go below the TRIMA line.
Downtrend market condition is easily identified using TRIMA also. When an asset is moving down in price, the TRIMA is positioned above the price. With the TRIMA line serving as resistance, the price cannot go above it.
With your knowledge of dynamic support and resistance, show TRIMA acting like one. And show TRIMA movement in a consolidating market. (Screenshots required).
TRIMA ACTING AS SUPPORT AND RESISTANCE
When the price of an asset goes down continuously until it meets a support level where it cannot further go downto verify that this is really a support level, we see TRIMA go below the price. Even if the support level exists for a couple of hours, the TRIMA indicators stays below until the asset starts to move up. At the support level, the TRIMA serves as the dynamic or second support for the asset. As far as the price moves up the indicator stays below the price and guards it up until the price meets a resistance level.
Similar TRIMA acts as resistance when an uptrend comes to exhaustion after a resistance level is reached and guards the price as it falls. In this case TRIMA stays above the price for as long as resistance is maintained. As son as a downtrend starts, the TRIMA line serves as a point where the price cannot go above, accompanying it down until it meets a support.
A consolidating market is a market that is ranging, it is sideways market where candles are take a horizontal shape from left to right. Here you see TRIMA in between the candles.
Looking at the above screenshot, we see the TRIMA line going in between the candles (price) for the consolidation period. This is now the TRIMA moves with the price in a ranging market.
This will continue until the market assumes a defined direction, then the TRIMA can position itself accordingly.
Combine two TRIMAs and indicate how to identify buy/sell positions through crossovers. Note: Use another period combination other than the one used in the lecture, explain your choice of the period. (Screenshots required).
One of the best ways to get entry points in crypto trading is the combination of the same type moving average of different periods. We saw the effectiveness of this when TEMA was combined. The crossovers created by them are used in making trading decision.
So the period of these indicators need to be modified to different periods to get good crossover points. Entry decisions taken with this setup gives a sure success outcome for either buy or sell trades.
Buy Position using TRIMA Crossover.
A buy entry point is given when the shorter TRIMA goes below the higher TRIMA in a downtrend on the chart. This is a signal of a bullish market by the indicators. At this time, a trader can make a buy entry above the point of crossover.
Sell Position using TRIMA Crossover.
A sell entry point or sell exit point is given when the longer TRIMA crosses over the shorter TRIMA in an uptrend. This is a signal of the end of the uptrend and a reversal. Once this happens, one can be sure to expect a downtrend, therefore a signal to sell. However the sell entry point should be made below the point of crossover where the asset is sure to continue on the downtrend.
What are the conditions that must be satisfied to trade reversals using TRIMA combining RSI? Show the chart analysis. What other momentum indicators can be used to confirm TRIMA crossovers? Show examples on the chart. (Screenshots required).
As no one indicator can stand on its own to give the best signals, it is best to combine TRIMA with other indicators. Even as seen in the buy and sell points indicated in the above charts, the crossover came a little late especially for the downtrend. The combination of two TRIMAs with RSI can be effective when the following criteria are applied for buy and sell position
Criteria for Trading Bullish Reversal using TRIMA
- Two TRIMAs of different periods and RSI should be added to chart on which the trade is to be made.
- The market should be in a downtrend or consolidation state, the RSI should reach oversold and the TRIMA with a smaller period should cross below the TRIMA with higher period.
- Take profit and stop loss points should be marked in the set up. Take profit should be above the crossover and stop loss should be below the crossover point. Risk reward ratio can be 1:1, 1:2 or 1:3 depending on the competence of the user.
Criteria for Trading Bearish Reversal using TRIMA
- Two TRIMAs of different periods and RSI should be added to chart on which the trade is to be made.
- The market should be in a uptrend or consolidation state, the RSI should reach overbought and the TRIMA with a higher period should cross above the TRIMA with lower period.
- Take profit and stop loss points should be marked in the set up. Take profit should be below the crossover and stop loss should be set above the crossover point. Risk reward ratio can be 1:1, 1:2 or 1:3 depending on the competence of the user.
Place a Demo and Real trade using the TRIMA reversal trading strategy (combine RSI). Ideally, bullish and bearish reversals. Utilize lower time frames with proper risk management. (Screenshots required).
Real Buy Trade of SHIB/USDT
Tradingview
This is the analysis done before the coin was bought.
| Platform | Huobi |
|---|---|
| Time Frame | 15 Minutes |
| Coin | Shiba Inu |
| Price | 0.00002170 |
| Take Profit | 0.00002350 |
| Stop loss | 0.00002120 |
What are the advantages and disadvantages of TRIMA Indicator?
Triangular Moving Average indicator has some advantages over other averages and indicators generally. It also has some disadvantages as it is not 100% accurate.
Advantages
- It smoothens the market by filtering all the noise in the market.
- It's lagging nature makes it gives signals that are correct
- It helps to identify points of support and resistance by stayung below and above the price respectively.
- The combination of two TRIMAs gives better signals which is not obtainable in other indicators.
Disadvantages.
- Just like every other indicator, TRIMA gives false signals that can mislead traders.
- Most times the signals produced by the combination of two TRIMAs come late disallowing one from making early entries.
CONCLUSION.
TRIMA is a similar indicator to TEMA that was discussed in this academy some weeks back. It is a very good indicator for technical analysis of cryptocurrencies. It was a very interesting time completing this task.
Cc: @fredquantum.
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