Fractal Adaptive Moving Average

Fractal Adaptive Moving Average Technical Indicator (FRAMA)

FRAMA, developed by John Ehlers, is a technical indicator that utilizes the algorithm of the Exponential Moving Average. It calculates the smoothing factor based on the current fractal dimension of the price series. FRAMA excels in tracking strong trend movements and effectively slows down during price consolidation.

Analysis with FRAMA

FRAMA can be analyzed using all types of analysis techniques commonly used for Moving Averages.

FrAMA slows down in the sideways phase and speeds up in the trend.

Calculation of FrAMA

N1 = (MAX(HIGH, N) - MIN(LOW, N)) / N
N2 = (MAX(HIGH, N) - MIN(LOW, N)) / N
N3 = (MAX(HIGH, 2 * N) - MIN(LOW, 2 * N)) / (2 * N)
D = (LOG(N1 + N2) - LOG(N3)) / LOG(2)
ALPHA = EXP(-4.6 * (D - 1))
FRAMA(i) = ALPHA * PRICE(i) + (1 - ALPHA) * FRAMA(i - 1)

Where:

N1 is calculated over the most recent N bars, N2 over the N bars before that and N3 over all 2N bars;
D is the fractal dimension of the price series;
ALPHA is the smoothing factor: a trending market gives a larger ALPHA (faster average), a sideways market a smaller ALPHA (slower average).