MESA Adaptive Moving Average

Developed by John Ehlers, the MESA Adaptive Moving Average is a technical trend-following indicator which, according to its creator, adapts to price movement “based on the rate change of phase as measured by the Hilbert Transform Discriminator”.

This adaptation method features a fast and a slow-moving average so that the composite moving average swiftly responds to price changes and holds the average value until the next bar’s close. Ehlers states that because the average’s fallback is slow, you can create trading systems with almost whipsaw-free trades.

MESA Adaptive Moving Average Indicator

The MESA Adaptive Moving Average is a trend indicator that looks like two moving averages. However, instead of curving around the price action, the MESA Adaptive Moving Average moves in a staircase manner as the price ratchets.

How To Calculate MESA Adaptive Moving Average

Formula:- It is based on the rate change of phase as measured by the Hilbert Transform Discriminator. This adaptation method features a fast and a slow-moving average so that the composite moving average swiftly responds to price changes and holds the average value until the next bar’s close. 

The FastLimit and SlowLimit parameters should be between 0.01 and 0.99

 The Averages act as support and resistance areas, and the price will tend to react to them. This makes pullbacks to the MAMA and FAMA suitable with-trend entry areas.

Why use MESA Adaptive Moving Average

The MESA AMA, similar to other traditional moving averages, can be used as a stand-alone indicator and in combination with other indicators, which are typically combined with Simple Moving Averages and Exponential Moving Averages to improve the decisions of the traders.

How to Use MESA Adaptive Moving Average

Bullish Scenario:- MAMA is a trend indicator, will move along the price and thus indicate the market scenario, i.e. if the value increases, it is a bullish market. 

Bearish Scenario:- Similarly, if the value of MAMA decreases, it will indicate a downtrend meaning a bearish scenario.

Building MESA Adaptive Moving Average Trading Strategy on Mudrex

Strategy:- 

BUY:- Fast limit(0.9) and Lower limit(0.09) Crosses up Fast limit(0.1) and Lower limit(0.01)

SELL:- Fast limit(0.9) and Lower limit(0.09) Crosses down Fast limit(0.1) and Lower limit(0.01)

TIME FRAME:- 3Hrs

Creating on Mudrex:- 

We will use 2 MAMA compare blocks—one for selling and one for buying.

For buying, we will use the following settings:-

For selling we will use the following settings:-

Final Strategy:-

Testing:- 

Running backtest on Binance Futures: BTC/USDT with tick interval of 3H yielded an overall profit of 286.73%

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