TMA is a fine indicator. Can it be used in a profitable strategy? Absolutely! When used live (as in, using the current bar TMA data), the indicator works perfectly. It shows the correct values for the upper and lower bands and you can trade from it manually or using an EA. I don't think anyone can debate this.
Now, the "problem" with the TMA indicator is that it repaints big time. I put problem in quotes because it is not a problem with the current candle. Again, I reiterate, the current candle is perfectly fine.
The problem is with past data on the charts. Since the indicator repaints previous candles' TMA data, you cannot accurately assess historical trades using this indicator!
Let's look at an example. Let's say your strategy calls for you to open a long trade any time a candle closes below the lower TMA line. Simple enough. Trading this strategy live is easy and TMA would work perfectly.
But let's look at a trade in the past using the TMA indicator...we'll do some visually backtesting.
The first chart shows the USDCAD,M5 with the TMA indicator. The white arrow shows where our entry would be - at the close of this candle because it closed below the lower TMA. And what a trade it would have been!!!! 120 pips!!!! Yes, this was an awesome trade!!!!
Not so fast...
Remember, the TMA repaints past data. The current candle is some 50 or so candles ahead. The TMA lines you see at this candle (white arrow) DO NOT accurately reflect what the lines looked like at the time we think the trade would have been entered!!!
The second chart shows the same as the first, except it uses the TMATrue indicator. The TMATrue indicator is the same as the standard TMA indicator except it does not repaint previous candle data. The current candle data is always the same for the standard TMA and TMATrue indicators. However, all previous candles will have different data. Why because the TMA repaints past data!
As you can see in this second chart, what we thought was our entry candle was not an entry candle at all. The candle never closed below the lower line of the TMA. Again, this chart reflects what it looked like at that time. So, no entry!!!!! And no 120 pips!!!!!
The third chart shows the same USDCAD,M5 chart through a simulator. I put both the TMA and TMATrue on the chart this time. As you can see, at the close of that same candle, the close price was no where near the lower TMA line. Our entry conditions were not met, thus no trade here.
To summarize:
The TMA is a nice indicator. Use it live and it might be very profitable for you. It paints beautiful lines and looks pretty. I am in no way stating that the TMA indicator is bad or cannot be used successfully.
However, when looking at past data to visually backtest or to just see past circumstances, the data is simply not accurate.
This also goes for any other indicator that repaints past candles. Be careful when visually backtesting because what you see now is not necessarily what the charts looked like back then.
By all means, continue using the TMA indicator for your live trading. It is fine for that. But, when you are visually backtesting or looking back through the charts, the TMATrue indicator is probably a better choice.
Now, I've mentioned this on several threads. Save for a few folks, my remarks have been met with absolute disdain. That is fine...everyone is entitled to their opinion. I'm sure many non-technical types will still see my argument here as nonsense. That is fine too. I'm more interested in the opinions of technologists and those that understand MT4 indicators.
I just think everyone should understand this about this TMA (and all repainting) indicators. There are plenty of threads where past trades are shown using TMA that simply would not have been taken live. This is a real shame and I can only hope this thread will help new traders.
Now, the "problem" with the TMA indicator is that it repaints big time. I put problem in quotes because it is not a problem with the current candle. Again, I reiterate, the current candle is perfectly fine.
The problem is with past data on the charts. Since the indicator repaints previous candles' TMA data, you cannot accurately assess historical trades using this indicator!
Let's look at an example. Let's say your strategy calls for you to open a long trade any time a candle closes below the lower TMA line. Simple enough. Trading this strategy live is easy and TMA would work perfectly.
But let's look at a trade in the past using the TMA indicator...we'll do some visually backtesting.
The first chart shows the USDCAD,M5 with the TMA indicator. The white arrow shows where our entry would be - at the close of this candle because it closed below the lower TMA. And what a trade it would have been!!!! 120 pips!!!! Yes, this was an awesome trade!!!!
Not so fast...
Remember, the TMA repaints past data. The current candle is some 50 or so candles ahead. The TMA lines you see at this candle (white arrow) DO NOT accurately reflect what the lines looked like at the time we think the trade would have been entered!!!
The second chart shows the same as the first, except it uses the TMATrue indicator. The TMATrue indicator is the same as the standard TMA indicator except it does not repaint previous candle data. The current candle data is always the same for the standard TMA and TMATrue indicators. However, all previous candles will have different data. Why because the TMA repaints past data!
As you can see in this second chart, what we thought was our entry candle was not an entry candle at all. The candle never closed below the lower line of the TMA. Again, this chart reflects what it looked like at that time. So, no entry!!!!! And no 120 pips!!!!!
The third chart shows the same USDCAD,M5 chart through a simulator. I put both the TMA and TMATrue on the chart this time. As you can see, at the close of that same candle, the close price was no where near the lower TMA line. Our entry conditions were not met, thus no trade here.
To summarize:
The TMA is a nice indicator. Use it live and it might be very profitable for you. It paints beautiful lines and looks pretty. I am in no way stating that the TMA indicator is bad or cannot be used successfully.
However, when looking at past data to visually backtest or to just see past circumstances, the data is simply not accurate.
This also goes for any other indicator that repaints past candles. Be careful when visually backtesting because what you see now is not necessarily what the charts looked like back then.
By all means, continue using the TMA indicator for your live trading. It is fine for that. But, when you are visually backtesting or looking back through the charts, the TMATrue indicator is probably a better choice.
Now, I've mentioned this on several threads. Save for a few folks, my remarks have been met with absolute disdain. That is fine...everyone is entitled to their opinion. I'm sure many non-technical types will still see my argument here as nonsense. That is fine too. I'm more interested in the opinions of technologists and those that understand MT4 indicators.
I just think everyone should understand this about this TMA (and all repainting) indicators. There are plenty of threads where past trades are shown using TMA that simply would not have been taken live. This is a real shame and I can only hope this thread will help new traders.
Attached Images (click to enlarge)
I see exactly what you're saying and when backtesting they need to use the TMATrue, especially when backtesting the MOM trades being talked about as they rely on it hitting the other side of the TMA.
