Stocks Technical Analysis Indicators Part 4

Application: heikin-ashi with Zero-lag TEMA Average

Using a longer period zero-lagging TEMA average on the heikin-ashi closing prices gives a smooth average with limited lag.

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Figure 5.12: S&P500 index with zero-lag TEMA crossover.

In the chart of the S&P500 index (figure 5.12), we applied the same zero-lag TEMA principle on the normal closing prices.

Putting both averages on the price chart you can see crossovers between both averages, which are very useful medium-term selling signals to close a long position.
 
A 60-day period for the TEMA average gives most useful results.

These are the formulas used:
ZLTMACL MetaStock® formula for a zero lagging TEMA average on the closing prices:
{ZLTMACL}
Periode:= Input("Zero-lagging CL TEMA Average ",1,100,60);
TMA1:= Tema(CLOSE,Periode);
TMA2:= Tema(TMA1,Periode);
Difference:= TMA1 - TMA2;
ZLTMACL:= TMA1 + Difference;
ZLTMACL

ZLTMAHA MetaStock® formula for a zero-lagging heikin ashi TEMA average:
{ZLTMAHA}
avg := Input("Zero-lagging HA TEMA average ",1,100,60);
haOpen:=(Ref((O+H+L+C)/4,-1) + PREV)/2;
haC:=((O+H+L+C)/4+haOpen+Max(H,haOpen)+Min(L,haOpen))/4;
TMA1:= Tema(haC,avg);
TMA2:= Tema(TMA1,avg);
Diff:= TMA1 - TMA2;
ZLTMAHA:= TMA1 + Diff;
ZLTMAHA

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