Blockchain and Cryptocurrency Advanced - Practical Demonstration of Using Another Indicator with Crossovers Between Two TEMAs In Trading

Even though the TEMA indicator has proven to be a very effective indicator for buy and sell signals, it is always a good idea to combine the TEMA indicator with another technical indicator for a more quality signal when it comes to placing a buy or sell trade using the signals from the TEMA indicator.

I will be using the TEMA indicator with the RSI indicator which is a good indicator for identifying overbought and oversold zones.

Buy trade on the AVAX/USDT

For the buy trade on the AVAX/USDT 5 mins chart, the buy signal was identified after the occurance of the bullish crossover or golden cross. I placed a buy entry for AVAX/USDT at 84.22 and using the 1:2 risk:reward ratio, I set my take profit at 85.21 and stoploss at 83.72.
Buy entry - 84.22
Take profit - 85.21
Stoploss - 83.72
After placing the buy entry, I was able to make a profit of +170 USD

The advantages and disadvantages of TEMA

Advantages

• The TEMA indicator is easy to understand and use
• TEMA indicator can be combined with a lot of other technical indicators like RSI, MACD for quality signal and signal confirmation
• TEMA generates reliable signals when compared with the SMA or the EMA
• The TEMA indicator provides signals ahead because there is no lagging and it is a leading indicator.
• TEMA indicator can work in any timeframe, whether for short term analysis or long term analysis
• TEMA indicator eliminates noise by smoothens the noise
• TEMA indicator is great for identifying trends in the market.

Disadvantages

• TEMA indicator can be prone to false signals during a high sharp market volatility
• Because TEMA eliminates lagging, there is a possibility for the signal to be false because of its quick reaction to price changes
• It is easier to miss important signals when using the TEMA indicator as it is a leading indicator that reacts quickly to price changes.
• In a ranging market or sideways movement, the TEMA indicator is almost not useful as there isn’t any reliable signals generated
• Because the TEMA indicator is a leading indicator, it is always advisable not to use it alone and to use it in combination with other indicators for signal confirmation before making trading decisions.