what does the tema tell you 
the tema reacts to price changes quicker than a traditional ma or ema will this is because some of the lag has been subtracted out in the calculation a tema can be used in the same ways as other types of mas mainly the direction the tema is angled indicates the short term averaged price direction when the line is sloping up that means the price is moving up when it is angled down the price is moving down there is still a small amount of lag in the indicator so when prices change quickly the indicator may not change its angle immediately also the larger the lookback period the slower the tema will be in changing its angle when price changes direction the tema and trend directionthe location of the tema relative to the price also provides clues as to the trend direction generally when the price is above the tema it helps confirm the price is rising for that lookback period when the price is below the tema it helps confirm the price is falling for that lookback period that said a lookback period should be chosen so this actually holds true most of the time therefore it is up to the trader to choose the appropriate lookback period for the asset they are trading if they intend to use the tema for helping to identify trends if the tema can help identify trend direction then it can also help identify trend changes if the price is above the average and then drops below that could signal the uptrend is reversing or at least that the price is entering a pullback phase if the price is below the average and then moves above it that signals the price is rallying such crossover signals may be used to aid in deciding whether to enter or exit positions the tema for support and resistancethe tema may also provide support or resistance for the price for example when the price is rising overall on pullbacks it may drop to the tema and then the price may appear to bounce off of it and keep rising this movement is reliant upon the proper lookback period for the asset if using the tema for this purpose it should have already provided support and resistance in the past if the indicator didn t provide support or resistance in the past it probably won t in the future finally some traders use the tema typically with a small lookback period as an alternative to price itself the single line filters out much of the noise on traditional candlestick or bar charts a line chart would also work in this regard the tema vs the double exponential moving average dema both these indicators are designed to reduce the lag inherent in average based indicators the tema reduces lag more than the double exponential moving average dema 2the formula for the dema is different which means it will provide the trader with slightly different information and signals it is calculated by multiplying the ema of price by two and then subtracting an ema of the original ema 3limitations of using the temawhile the tema reduces lag it still inherits some of the traditional problems of other mas mas are primarily useful in trending markets when the price is making sustained moves in one direction or the other 4 during choppy times when the price is seesawing back and forth the ma or tema may provide little insight and will generate false signals since crossovers may not result in a sustained move as long as the price stays rangebound reduced lag may benefit some traders but not others some traders prefer their indicators to lag because they don t want their indicator reacting to every price change since the tema reacts quicker to price changes it will track the price more closely than a simple moving average sma for example but that also means that the price may cross the tema on a smaller price move than what is required to cross the sma investors typically don t want to actively trade so they don t wish to be shaken out of positions unless there is a significant trend change one type of ma is not better than another deciding which to use comes down to personal preference and what works best for the strategy someone is using the tema is best used in conjunction with other forms of analysis such as price action analysis other technical indicators and fundamental analysis example of the temahere s an example of a tema applied to the spdr s p 500 etf image by sabrina jiang investopedia 2021the tema smooths out the price action the angle of the tema helps identify the overall trend direction even during the day to day noise of minor price fluctuations 