FRAMA & CPMA Strategy [CSM]

This trading strategy uses the FRAMA (Fractal Adaptive Moving Average) and the CPMA (Composite Price Moving Average) to determine entry points, plots these indicators, and employs an optional filter based on engulfing candle patterns. It provides specified take profit and stop loss levels, and allows for trailing take profit adjustments.

To trade this strategy manually on TradingView:

• Apply the FRAMA and CPMA indicators to your chart with the following settings: FRAMA length (21 periods) and CPMA length (21 periods).
• Use the price and the HL2 (high + low / 2) values to calculate CPMA through a custom script or equivalent technical tool.
• For FRAMA, use the 'close' price as the source with the defined length and multiplier (fractal dimension of 0.8).
• Look for a bullish condition when the price crosses and closes above either FRAMA, CPMA, or both. Look for a bearish condition when the price crosses and closes below either FRAMA, CPMA, or both.
• If the engulfing filter is enabled, only take long signals if a bullish engulfing pattern is detected along with the bullish condition as defined above; similarly, only take short signals if a bearish engulfing pattern is detected along with the bearish condition.
• For exits, set a take profit level based on a percentage (input as 10) of the current price for long and short positions. Implement a trailing take profit at the specified amount (input as 0.5) or step size and a stop loss at a certain value away from the entry price (input as 100).
• Only trade within the user-defined date range, with a specified start date (e.g., '01 Jan 2023') and end date (e.g., '1 Jan 2099').

Improving the FRAMA & CPMA Strategy through manual trading involves refining entry signals, optimizing exit strategies, and employing additional technical analysis tools for enhanced confirmation and profitability. Here is a structured plan to optimize the strategy:

• Refine FRAMA and CPMA Parameters: Adjust the length of the FRAMA and CPMA to better align with the asset's volatility and trading volume. Experiment with different periods to find the optimal setting that captures the prominent market trends without too much lag or noise.
• Incorporate Price Action: Use candlestick patterns and formations for additional entry confirmation. Beyond engulfing candles, look for patterns like hammers, shooting stars, and doji candles at key support and resistance levels to provide added conviction to the strategy signals.
• Volume Analysis: Integrate volume indicators such as the Volume-Weighted Average Price (VWAP) or On-Balance Volume (OBV) to confirm the strength of the trend indicated by the FRAMA and CPMA signals. High volume confirmation acts as a secondary validation, increasing the probability of a successful trade.
• Broader Market Sentiment: In the case of BankNifty or similar indices, gauge overall market sentiment using related indices or futures, as broader market trends can significantly impact individual instruments. Ensure that the signals from the strategy are in sync with the overall market direction.
• Exit Strategy Optimization: Use ATR (Average True Range) to set dynamic stop-loss and take-profit levels that adjust to the current market volatility, ensuring that the strategy accommodates different market conditions and price swings while locking in profits and preventing excessive losses.
• Timeframe Analysis: Apply the strategy across multiple timeframes to identify the most reliable signals. For instance, a signal confirmation on both short-term and long-term charts can be an indication of a stronger and more consistent trend.
• Risk Management: Implement a risk-to-reward ratio that aligns with your trading goals and risk profile. Regularly reassess position sizes based on account equity and market conditions to manage overall exposure.
• Continuous Backtesting: Periodically backtest the strategy manually on historical data to validate its effectiveness over time. Refine strategy parameters based on backtesting results and evolving market dynamics.

By continuously refining these aspects of the FRAMA & CPMA strategy, a manual trader can significantly improve their trade selection and performance outcomes. Each improvement should be tested and validated with historical data and forward-testing before full implementation.

The FRAMA & CPMA Strategy is designed primarily for traders who are versed in technical analysis and have a keen interest in active trading within the BankNifty market. It suits those who prefer a systematic approach to capitalizing on short-term price movements and trends.

This strategy aligns well with traders who:

• Desire dynamic support and resistance levels for precise entries and exits.
• Value indicators that adapt to market volatility, such as FRAMA.
• Look for momentum-based trade signals, leveraging oscillators like the CPMA.

The trading style facilitated by this strategy is intraday to swing trading, where quick responsiveness to the market is paramount and the focus is on capturing significant price swings rather than long-term investments. This strategy provides a structured framework for those looking to engage with the markets on a detailed analytical level.

Key takeaways:

• Strategy essence: Utilizes FRAMA to adapt to market conditions and CMO with COG to pinpoint momentum and support/resistance levels.
• Operation: Generates long/short signals based on price crossing the FRAMA or CPMA, with optional engulfing candle filters.
• Automation: Can be run as a TradingView script with inputs for customizable indicator parameters and trade management settings.
• Manual trading: Possible by applying FRAMA, CPMA, and volume analysis on TradingView, with attention to price action for confirmation.
• Optimization: Adjust indicator settings and analyze multiple timeframes while backtesting to improve signal reliability.
• Risk management: Employ ATR-based dynamic stop-loss and take-profit levels according to market volatility and trader's risk profile.
• User group: Ideal for technical traders engaging in active intraday to swing trading within the BankNifty market.