What is the T-line?
The T-line is simply the 8 day exponential moving average, or 8 EMA for short.
The simple rules of trading the T-line are this:
- Open a long position if stock price closes above the T-line.
- Close a long position if stock price closes below the T-line.
Indicating An Uptrend Based on the T-line
Here is a 2 Month Chart of Facebook (FB). As you can see, the stock price closed above the T-line (blue line). According the simple strategy, this would be a signal to open a long position on FB. Of course, as an added measure, it’s important to check other indicators like MACD, divergence, the fundamentals of a stock, and the volume of trading, before jumping into a trade.
Trading based on the T-line is a new concept to me, although I’ve been using the 7 EMA for years and comparing it to the 20, 35, 50, 100 and 200 Moving Averages to determine uptrends and downtrends.
In the chart above, the T-line (8 EMA) has crossed above the 35 SMA, which is a buy signal. Also, the MACD indicator is crossing above the signal line and divergence indicator is crossing above 0. All indicators signaling an uptrend.
Here is more information about using the T-line when trading stocks.