What can exactly this indicator do?
Developed by Perry Kaufman, Kaufman's Adaptive Moving Average (KAMA) is a moving average designed to account for market noise or volatility. KAMA will closely follow prices when the price swings are relatively small and the noise is low. KAMA will adjust when the price swings widen and follow prices from a greater distance. This trend-following indicator can be used to identify the overall trend, time turning points and filter price movements.
How can this information help my trading?
This indicator shows the tendency of the price and the change of the same confirming the change or the continuation with some points (yellow/blue). These points can be taken as inputs or to stay within the market if it is already inside.
- PeriodKAMA: Number of bars/periods of the MA (Moving Average).
- nFast: Fast Alpha*
- nSlow: Slow Alpha*
- G: Deviation with regard the price. (It is advisable to leave it in 2.0)
- dK: Displacement of the points once you have changed the trend. (It is advisable to leave it in 2.0)
* A "alpha" represents a EMA (Exponential Moving Average). Fast Alpha (EMA) it is recommended that this should be for 2 periods, and Slow Alpha (EMA) to be 30 periods. These EMA's are used to calculate the volatility of the market and their values are taken into account to represent a AMA (Adaptive Moving Average).
Miguel Angel Vico Alba (Mike eXplosion), Trader Freelance & Computer Engineer.