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FRAMA(i) = 1 * Price(i) + (1 - i) * FRAMA(i-1) = Price(i)
I.e. the indicator exactly follows the price.
The fractal dimension of a plane is equal to two. From the formula we get that if D = 2, then the smoothing factor A = EXP(-4.6*(2-1)) = EXP(-4.6) = 0.01. Such a small value of the exponential smoothing factor is obtained at moments when price makes a strong saw-toothed movement. Such a strong slow-down corresponds to approximately 200-period simple moving average.
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Formula of fractal dimension:
D = (LOG(N1 + N2) - LOG(N3))/LOG(2)
It is calculated based on the additional formula:
N(Length,i) = (HighestPrice(i) - LowestPrice(i))/Length
where:
- HighestPrice(i) - current maximal value for Length periods;
- LowestPrice(i) - current minimal value for Length periods;
Values N1, N2 and N3 are respectively equal to:
N1(i) = N(Length,i)
N2(i) = N(Length,i + Length)
N3(i) = N(2 * Length,i)
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