KAMA is short for Kaufman Adaptive Moving Average, and is quite popular within the Metatrader 4 indicator family.
The Metatrader 5 variant of the adaptive moving average is built on the exponentially smoothed moving average mixed with the traditional methods of spotting and applying volatility as a dynamically varying smoothing constant.
Perry J. Kaufman is known to be the brain behind the Adaptive Moving Average and this concept was introduced in his book titled Smarter Trading: Improving Performance in Changing Markets in 1995.
There are basically two inputs parameters available on the KAMA MT5 indicator:
Period – defines the calculation period;
Applied price – defines the price used for calculations.
The formula used for calculating the KAMA indicator as follows:
KAMA[i] = KAMA[i-1] + sc * (Price[i] – KAMA[i-1])
sc = (er * 0.6015 + 0.0645) * (er * 0.6015 + 0.0645),
er = Abs(Price[i] – Price[i-Period+1]) / Sum1, and
Sum1 = Sum(Abs(Price[i] – Price[i-1])) from (i-Period+1) to i
The KAMA MT5 indicator line can be used as a resistance/support level when the value of the period is adjusted upwards (try using 100 as the value of the period).
At the same time, we can say price is bullish when the candles are aligned above the KAMA Metatrader 5 indicator line and price is said to be bearish when the candles are aligned below the KAMA MT5 indicator line.
MT5 Indicator Characteristics
Currency pairs: Any
Platform: Metatrader 5
Type: chart pattern indicator
Customization options: Variable (Period, Applied price), Colors, width & Style.
Time frames: 1-Minute, 5-Minutes, 15-Minutes, 30-Minutes, 1-Hour, 4-Hours, 1-Day, 1-Week, 1-Month
Copy and paste the KAMA.ex5 indicator into the MQL5 indicators folder of the Metatrader 5 trading platform.
You can access this folder from the top menu as follows:
File > Open Data Folder > MQL5 > Indicators (paste here)