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# Averages > T3 Average

Article/Author: "Smoothin Techniques For More Accurate Signals", Tim Tilson, S&C Magazine, Traders Tips, 01/1998

File Includes:

Indicator - T3
Function - GD
Indicator - IE/2

Category: Averages > T3

Description:

This indicator plots the moving average described in the January, 1998 issue of S&C, p.57, "Smoothing Techniques for More Accurate Signals", by Tim Tillson. This indicator plots T3 moving average presented in Figure 4 in the article. T3 indicator is a moving average which is calculated according to formula:

T3(n) = GD(GD(GD(n))),

where GD - generalized DEMA (Double EMA) and calculating according to this:

GD(n,v) = EMA(n) * (1+v)-EMA(EMA(n)) * v,

where "v" is volume factor, which determines how hot the moving average’s response to linear trends will be. The author advises to use v=0.7.

When v = 0, GD = EMA, and when v = 1, GD = DEMA. In between, GD is a less aggressive version of DEMA. By using a value for v less than1, trader cure the multiple DEMA overshoot problem but at the cost of accepting some additional phase delay.

In filter theory terminology, T3 is a six-pole nonlinear Kalman filter. Kalman filters are ones that use the error — in this case, (time series - EMA(n)) — to correct themselves. In the realm of technical analysis, these are called adaptive moving averages; they track the time series more aggres-sively when it is making large moves. Tim Tillson is a software project manager at Hewlett-Packard, with degrees in mathematics and computer science. He has privately traded options and equities for 15 years.

Usage:

The most popular method of interpreting a moving average is to compare the relationship between a moving average of the security's price with the security's price itself (or between several moving averages). Inputs:

Price - price type to use
Period - number of bars to use in calculation
VFactor - volume factor, which determines how hot the moving average’s response to linear trends will be

EasyLanguage Code:
```INPUTS: PRICE(CLOSE), PERIOD(6), VFACTOR(.7);
VARS: T3(0);

T3 = GD (GD (GD (PRICE, PERIOD, VFACTOR), PERIOD, VFACTOR), PERIOD, VFACTOR);

PLOT1(T3, "T3");

IF CLOSE CROSSES ABOVE PLOT1 OR CLOSE CROSSES BELOW PLOT1 THEN