Kaufman's Adaptive Moving Average (KAMA)
The "Adaptive Moving Average" was presented in 1998 by Perry J. Kaufman in his book "Trading Systems and Methods, 3rd Edition". Kaufman modified the conventional Moving Average with the aid of an "adaptive" approach. The intention here is to make the Moving Average more trend-efficient.
The current value of the KAMA is calculated by first forming "sc". Then "sc" is multiplied with the expression [Price - KAMA (of the previous day)]. Finally, the KAMA (of the previous day) is added to this value.Formula
The adjustable period length can be chosen from 1 to 500. The most common settings will have a period length ranging from 8 to 100.Interpretation
The KAMA shows an upwards or downwards trend by rising or falling, whilst a sideways trend is exhibited through a KAMA running almost horizontally. If the KAMA runs sideways, it may be worthwhile applying proven oscillators.
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