Kaufman adaptive moving average

What it shows

Perry Kaufman designed KAMA to adjust itself. It measures how efficiently price moves: the net change over N bars divided by the sum of all the bar-to-bar moves. When the ratio is near 1 the move is steady and the average speeds up. Near 0, it is choppy and the average slows down.

In a sideways market the line stays almost flat, which reduces false crosses.

How we find it

The same code that draws it on your chart follows these steps, with the same result every time.

1. Compute the efficiency ratio ER = |close − close N bars ago| ÷ sum of |bar-to-bar changes| over N bars.
2. Compute the smoothing constant SC = (ER × (fast − slow) + slow)², with fast = 2 ÷ 3 and slow = 2 ÷ 31.
3. KAMA = previous KAMA + SC × (close − previous KAMA).
4. Plot it.

Starting values: N 10; Fast 2 bars; Slow 30 bars. These are proposed and will be tuned on real price data before launch.

How to read it

• The line is flat in choppy stretches.
• It follows price in strong moves.
• It is not smooth in a fixed way, because its speed changes.

Status labels you may see

Limits

• Complex to explain and to tune.
• A flat line can hide a slow trend.
• Less common.

Try it in forecastviz

• Open any ticker and choose Moving averages → Kaufman adaptive moving average in the left menu.
• Switch between 3M, 6M, 1Y to see how the picture changes.
• Compare with Exponential moving average and Simple moving average on the same chart.

Questions

Related trends

Further reading

• Murphy, Technical Analysis of the Financial Markets
• Kaufman, Trading Systems and Methods
• Achelis, Technical Analysis from A to Z