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FRAMA - Fractal Adaptive Moving Average

Posted in Indicators of technical analysis

Fractal adaptive moving average (abbreviation FRAMA aka FAMA) was created by John Ehlers. The aim of FRAMA is to identify the price fractals. Fractals are a geometrical shapes that can be devided into smaller parts. These parts are just a smaller copy of the whole geometrical shape.

FRAMA divides the price chart into smaller parts and then compares these parts one another. The price chart is a cluster of many squares - larger and smaller ones. E.g. if we want to calculate an 8-day Fractal Adaptive moving average, Frama analyses these 8 days time period, but it also analyses, how the price acts during the first 4 days and next 4 days.

The aim of Frama is to take into consideration just the important price changes. If price moves one side significantly enough, Frama will follow the price very tight. If the price is in a range without any important price move, Frama will act very flat. In other words - this moving average changes the number of days for its calculation, depending on the fractals behaviour. That's the reason why it is "adaptive" (similar to KAMA).

If you are interested in a deeper study of this technical indicator and prefer ready to serve solutions, this section may be of  interest to you. There you can find all the available indicators in Excel file for download.