Question 1

What is KAMA?

Accepted Answer

The Kaufman Adaptive Moving Average (KAMA) automatically adjusts its smoothing factor based on market volatility. In trending markets it speeds up to follow the price closely; in choppy or ranging markets it slows down to avoid whipsaws. Developed by Perry Kaufman.

Question 2

How it works

Accepted Answer

``` Efficiency Ratio (ER) = |Close - Close_N_bars_ago| / Sum(|Close_i - Close_{i-1}|, N) Smoothing Constant (SC) = (ER × (fast_k - slow_k) + slow_k)^2 where fast_k = 2/(fast+1), slow_k = 2/(slow+1) KAMA = KAMA_prev + SC × (Close - KAMA_prev) ``` - **ER** measures how "efficient" the price movement is (0 = noise, 1 = clean trend). - When ER is high (trending), SC approaches the fast constant and KAMA reacts quickly. - When ER is low (choppy), SC approaches the slow constant and KAMA barely moves.

Question 3

Key features

Accepted Answer

- **Self-adapting** — no need to manually switch parameters for different market conditions. - **Noise-resistant** — stays flat during sideways chop, reducing false signals. - **Trend-following** — accelerates when a real trend develops.

Question 4

Trend direction

Accepted Answer

- Price above KAMA — bullish. - Price below KAMA — bearish.

Question 5

Flat KAMA

Accepted Answer

- When KAMA is nearly flat, the market is range-bound — avoid trend-following trades.

Question 6

Breakout confirmation

Accepted Answer

- If KAMA starts rising/falling sharply after being flat, a new trend may be starting.

Question 7

Parameters

Accepted Answer

| Parameter | Default | Description | |-----------|---------|-------------| | Period | 10 | ER lookback length | | Fast | 2 | Fast EMA constant period | | Slow | 30 | Slow EMA constant period |

Question 8

Example conditions

Accepted Answer

| Condition | Meaning | |-----------|---------| | `close > KAMA(10)` | Price above adaptive average — bullish | | `close cross_over KAMA(10)` | Price breaks above KAMA — potential trend start | | `KAMA(10) cross_over SMA(50)` | KAMA crosses above SMA — strong bullish confirmation |

Question 9

Tips

Accepted Answer

- KAMA is one of the best "set and forget" moving averages thanks to its adaptivity. - Default parameters (10, 2, 30) work well across most markets and timeframes. - Compare KAMA to ALMA — both reduce noise, but KAMA adapts dynamically while ALMA uses static Gaussian weights. - KAMA slope changes are more meaningful than price crossovers of KAMA in some strategies.