Using Floating Levels to Filter Kaufman Adaptive Moving Average Signals

Summary

This document explains Kaufman’s Adaptive Moving Average (KAMA), a trend-following indicator that adjusts its responsiveness to price noise. It tracks price more closely in quieter conditions and smooths more heavily when swings widen. The author describes using KAMA to identify broad direction, possible turning points, and price movements worth filtering.

The proposed addition is a set of floating levels intended to address two practical difficulties: separate KAMA instances can sometimes produce identical values, and slope-based signals may trigger repeatedly in ranging markets. The indicator offers two coloring choices: change color when price crosses the outer levels, or when it crosses a middle level that acts like a zero line. The document explains the motivation and available signal modes, but supplies no formulas, parameter settings, historical tests, or performance evidence. Traders would need to define and evaluate the levels for their market and timeframe before drawing conclusions about signal quality.

Key ideas

• KAMA adapts its responsiveness to changing levels of price noise.
• The indicator can help identify the broad trend, turning points, and movements to filter.
• Using two KAMA instances can be difficult because they may produce the same output at some times.
• Slope-based signals may generate repeated false signals in ranging markets.
• Floating levels can trigger color changes at outer-level crossings or at a middle-level crossing.

Tags

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