📊 TECHNICAL
Kaufman's Adaptive Moving Average (KAMA)
An adaptive average introduced by Perry Kaufman that automatically speeds up in trending markets and slows down in choppy, sideways markets using an efficiency ratio.
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Live Demo — Kaufman's Adaptive Moving Average (KAMA) applied to NIFTY 50 (illustrative)
PriceEMA(9)EMA(21)SMA(20)
What is KAMA?
Introduced by Perry J. Kaufman in Smarter Trading. Unlike a fixed-period MA, KAMA continuously adjusts its own smoothing constant based on how efficiently price is moving.
Formula
ER = |Close - Close[n ago]| / Sum(|Close_i - Close_i-1|, n)
SC = [ ER*(fastSC-slowSC) + slowSC ]^2
KAMA_today = KAMA_prev + SC*(Price - KAMA_prev)Parameters
| Parameter | Default | Description |
|---|---|---|
| ER Period (n) | 10 | Lookback used to measure price efficiency |
| Fast Period | 2 | Length behind the fastest smoothing constant |
| Slow Period | 30 | Length behind the slowest smoothing constant |
| Source | Close | Price field used |
Signal Interpretation
- KAMA hugging price with a steep slope indicates a strong, efficient trend.
- KAMA flattening signals a low-efficiency, range-bound market.
- Price crossing KAMA is a valid entry/exit trigger with fewer false signals in choppy conditions.
- A rising Efficiency Ratio can hint a trend is about to accelerate.
Tips & Best Practices
- Well suited to instruments alternating between trending and ranging phases.
- Use the flattening behavior as a regime filter.
- Widening the ER period smooths adaptivity; narrowing reacts faster.