Ehlers MESA Adaptive Moving Average

The Ehlers MESA Adaptive Moving Average indicator provides a dynamic trend-following system that adjusts its reactivity based on price phase changes measured by the Hilbert Transform Discriminator. This tool aims to reduce lag during trending periods while maintaining smoothness during consolidation, offering a high-efficiency signal through its dual-line (MAMA and FAMA) structure.

Usage

The Usage section describes how the script can be used, examples should be provided in this section. This tool functions as a standalone trend-following system or a signal filter. Users typically look for the interaction between the MESA Adaptive Moving Average (MAMA) and the Following Adaptive Moving Average (FAMA).

• Trend Identification: When the MAMA is above the FAMA, the trend is considered bullish. Conversely, when the MAMA is below the FAMA, the trend is considered bearish.
• Crossover Signals: A crossover of the MAMA over the FAMA can be used as a potential entry or exit signal. The "Mark Crossover Points" setting can be enabled to highlight these events on the chart with visual icons.
• Ribbon Mode: By enabling the "Fill MAMA/FAMA Region" setting, the space between the two averages is colored, creating a visual ribbon that helps identify trend strength and volatility.
• Bar Coloring: The "Enable Bar Colors" setting changes the color of price bars based on the relative position of the MAMA and FAMA, assisting in rapid trend assessment.

Details

The script is based on John Ehlers' MESA Adaptive Moving Average (MAMA) algorithm. Unlike standard moving averages that use a fixed period, MAMA adapts to the rate of change of the phase of the market cycle.

The calculation utilizes a Hilbert Transform Discriminator to compute the phase of the cycle. This phase change determines the alpha (smoothing factor) used for the moving average. The result is a "fast attack" average that follows price closely when the phase changes rapidly and a "slow decay" average that holds its value when price movement slows down. The FAMA (Following Adaptive Moving Average) is derived from the MAMA, providing a secondary smoothed signal line that exhibits even less vertical movement, effectively acting as a signal line with minimal lag.

Settings

• Source: Determines the price data used for the calculations (default is hl2).
• Fast Limit: Sets the upper bound for the adaptive alpha value, controlling how quickly the indicator reacts to fast price movements.
• Slow Limit: Sets the lower bound for the adaptive alpha value, ensuring the indicator maintains a minimum level of smoothing.
• Mark Crossover Points: When enabled, plots visual shapes on the chart whenever the MAMA and FAMA cross.
• Fill MAMA/FAMA Region: When enabled, applies a background fill between the MAMA and FAMA lines to create a visual ribbon.
• Enable Bar Colors: When enabled, colors the price bars based on the current trend state (MAMA vs. FAMA).

FAQ

How do I interpret the relationship between MAMA and FAMA? The MAMA is the primary fast-acting line, while the FAMA is the secondary signal line. A bullish trend is indicated when MAMA is above FAMA, and a bearish trend is indicated when MAMA is below FAMA.

Why does the indicator seem to "staircase" during flat markets? This is a feature of the MAMA algorithm. It is designed to hold its value (ratchet) until a significant phase change occurs, which helps avoid whipsaws in sideways markets.

How can I access the Ehlers MESA Adaptive Moving Average tool? You can get access on the LuxAlgo Library for charting platforms like TradingView, MetaTrader (MT4/MT5), and NinjaTrader for free.