AMA and AMA Signals is a client side VTL Indicator. It plots the Kaufman Adaptive Moving Average (KAMA) on the chart and identifies the market trend with the dots plotted on the KAMA line.
The most general use of moving average (MA) is trend identification. The rising MA line signals uptrend and declining MA line signals down trend. KAMA will closely follow prices when the price swings are relatively small and the noise is low. KAMA will adjust when the price swings widen and follow prices from a greater distance. This trend-following indicator can be used to identify the overall trend, time turning points and filter price movements. AMA and AMA Signals indicator identifies the KAMA turning points and plots green dots when the AMA is in uptrend and yellow dots when the AMA is in down trend. The dots on the AMA line can be used as a trend filter.
A simple trading strategy with this indicator is to Buy when the yellow dots turn to green dots, that is when the trend turns up. Sell position is opened when the green dots turn yellow, that is when the trend turns down. It can be used as trend filter in other trading strategies by checking the color of the dots. The KAMA line can be used as a trailing stop loss also. Another example to trade using the AMA & AMA Signal indicator is wait for price to reach support or resistance. After testing the support, if the AMA & AMA Signal Indicator gives a buy signal by plotting green dot, open a buy position. After testing a resistance, if the AMA & AMA Signal indictor gives a sell signal by plotting yellow dots, open a sell position. Stop loss can be placed a few pips above the KAMA line.
The indicator parameters:
1 KAMA Period – Period for AMA calculation
2 Fast - Fast period for AMA
3 Slow - Slow period for AMA
4 G and dk - Smoothing Constants
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