Natural Moving Average (NMA)

Overview

The Natural Moving Average represents a breakthrough in adaptive indicator design from Jim Sloman's Ocean Theory, which views markets as fluid systems similar to ocean currents. Unlike traditional moving averages that apply fixed calculations regardless of market conditions, NMA uses momentum adapting to dynamically adjust its responsiveness. During trending markets with strong momentum, the NMA becomes more sensitive to capture the move quickly. In choppy, low-momentum conditions, it becomes smoother to filter out noise. This natural adaptation occurs through a sophisticated calculation that considers both price changes and volume, creating an indicator that behaves more like market participants actually trade.

What sets NMA apart is its incorporation of volume into the averaging process, recognizing that price movements on high volume carry more significance than those on low volume. The dynamic ratio calculation adjusts the weighting of recent versus historical data based on current market conditions, creating dramatic differences from standard moving averages of the same period. With a default period of 40, NMA can appear radically different from a 40-period SMA or EMA, sometimes leading price changes by several bars due to its adaptive nature. This makes NMA particularly valuable for identifying genuine trend changes while avoiding whipsaws in ranging markets.

Interpretation & Trading Signals

Example Usage

Code examples will be available once the Rust implementation is complete.