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Tim Tillson’s article “Smoothing Techniques for More Accurate Signals” appeared in the renowned Stocks & Commodities magazine. In the article the Tillson moving average (also called T3 moving average) and the Tillson histogram are explained.
Traders like the Tillson moving average because it has less lag and a considerably smoother curve compared to the more well-known averages such as the simple moving average or the exponential moving average.
The Tillson moving average is available in two version: the standard version and the crossing version. In the simple mode the average is calculated one time from the close price and plotted as a single line. In the crossing version the average is calculated two times over two different horizons, and plotted as two crossing lines.
This example shows the standard version of the Tillson moving average. The line is green when the market trend is positive. The line is red when the market trend is negative.
This example shows the crossing version of the Tillson moving average. When the fast T3 crosses the slow T3 upwards, the trend is positive. This is a buy signal. When the fast Tillson moving average crosses the slow Tillson moving average downwards, the trend is negative. This is a short sell signal.
Both Tillson moving average versions can be used to filter the trend (shown as a red or green background in the chart) and to give a trading signal.
The Tillson T3 histogram shows the difference between a short-term and a long-term Tillson moving average. The concept is similar to an MACD. When the value increases the trend is considered positive (bullish). When the value decreases, the trend is considered negative (bearish).
This example shows the Tillson histogram. The green background in the chart indicates the market trend is positive according to the histogram. The red background indicates the trend is negative.
Traders also read: 'Determining the trend with the Maximum-Likelihood indicator' and 'The 2-in-1 candles'