DEMA & TEMA
Double and Triple Exponential Moving Averages -- how they reduce lag beyond standard EMA and when the extra speed helps.
What are DEMA and TEMA?
DEMA (Double Exponential Moving Average) and TEMA (Triple Exponential Moving Average) are moving averages designed to reduce the lag that comes with standard SMA and EMA. They do this by applying mathematical corrections that remove some of the delay without adding a new parameter to tune.
If you have ever felt that your EMA crossover signals come too late -- confirming a trend well after it has started -- DEMA and TEMA offer a way to tighten that gap. The tradeoff is more sensitivity to noise, which means more false signals in choppy markets.
How They Work
DEMA and TEMA are not simply "run EMA twice" or "run EMA three times." They use a specific formula that subtracts out the lag from the standard EMA.
DEMA Formula
In plain English: calculate the EMA of the closing prices. Then calculate the EMA of that EMA (a double-smoothed version). Subtract the double-smoothed version from twice the original EMA. The subtraction removes some of the lag that the smoothing introduced.
TEMA Formula
Where EMA1 = EMA(close, N), EMA2 = EMA(EMA1, N), and EMA3 = EMA(EMA2, N). This takes the lag-removal concept one step further by also correcting for the lag introduced by the double smoothing itself.
Lag Comparison
The core difference between these moving averages becomes clear at trend reversals. When the price changes direction, each indicator turns at a different speed:
At the same period setting, the lag ranking from most to least is: SMA -> EMA -> DEMA -> TEMA. TEMA hugs the price most closely, which is desirable during genuine trend changes but can produce whipsaws during sideways price action.
When to Use DEMA or TEMA
Use DEMA when
You want noticeably faster signals than EMA but are concerned about TEMA being too aggressive. DEMA is a moderate step up from EMA in responsiveness and is a good first choice if you feel your EMA signals are consistently late.
Use TEMA when
Speed is your priority and you have additional filters to manage false signals. TEMA works well in strongly trending markets where you want to enter as early as possible. In ranging or choppy markets, TEMA will whipsaw more than DEMA or EMA.
Stick with EMA when
You are trading in mixed conditions (some trending, some ranging) and want a balance between responsiveness and stability. EMA is the safer default choice when you are not sure which environment your strategy will face.
Common Mistakes
Expecting DEMA or TEMA to eliminate lag entirely
DEMA and TEMA reduce lag -- they do not remove it. Both are still calculated from past prices and cannot react to a move before it happens. If you see TEMA occasionally leading price in a backtest, that is a coincidence of the specific data, not a fundamental property of the indicator.
Using DEMA/TEMA crossovers in ranging markets
The extra responsiveness of DEMA and TEMA means they produce more crossover signals than SMA or EMA. In a ranging market, this translates to more false entries and exits. If your backtest shows a string of small losses, adding a confirmation filter (like an ADX trend strength check) can help filter out signals during non-trending periods.
Comparing DEMA/TEMA to EMA at different periods
A 10-period DEMA is not comparable to a 30-period EMA. When evaluating the lag difference, use the same period for both. The lag reduction of DEMA and TEMA comes from the formula, not from using a shorter period.
Where to Go Next
SMA (Simple Moving Average) -- the foundational moving average that DEMA and TEMA improve upon.
EMA (Exponential Moving Average) -- the building block used inside the DEMA and TEMA formulas.
Moving Averages Overview -- all 10 moving average types, including adaptive alternatives like KAMA and MAMA.
Trend Following -- strategies where DEMA and TEMA's reduced lag is most beneficial.