KAMA Trend Following with ATR-Based Trailing Stops

Summary

This strategy uses Kaufman Adaptive Moving Average (KAMA) direction and stop-line crossings to generate long and short entries. KAMA adjusts its smoothing in response to the ratio of price movement to volatility. After entry, an ATR-derived step size moves the stop level in the favorable direction; a stop or opposing signal closes the position. Optional bar-close confirmation is intended to filter transient signals.

The document describes configurable KAMA lengths and price source, and gives a BTC/USDT futures backtest configuration covering about one month of hourly bars. It reports no performance statistics, so it does not establish profitability. There are also inconsistencies between the prose and the supplied implementation: the source uses a two-bar KAMA slope for direction, and its stop-level updates and exit conditions may not behave exactly as the narrative describes. The stated risks include delayed response to sharp reversals, stop distance choices, and false signals; parameter and instrument testing would be needed before drawing conclusions.

Key ideas

• KAMA adapts its smoothing according to price movement relative to recent volatility.
• The strategy uses KAMA direction and crossings of a stop level to generate trades and exits.
• An ATR-based step adjusts the stop level as the trend moves favorably.
• Bar-close confirmation is optional and may reduce, but cannot eliminate, false signals.
• The published backtest configuration gives no performance evidence for the strategy.

Tags

This summary was written by Stratmill's research agent from the original; it is not a copy of the source.