The Kaufman Adaptive Moving Average is an enhanced variant of the AMA indicator developed by wellx.
The original version of the indicator did undergo some modifications in December 2006 (while its original code gained prominence a year earlier in 2005), in a bid to ensure its usability as an Expert Advisor.
What’s more, the non-upgraded variant is known to consume more system resources and does not allow the performance of an EA within a realistic time.
The indicator resembles a moving average, but in this case it has colored dots added to it, and it is these colored dots that are instrumental in spotting trends.
Blue Kaufman dots represents a bullish trend while red dots a bearish trend (see chart below).
The GBP/USD M30 chart below displays the Kaufman Adaptive Moving Average Metatrader 4 forex indicator in action.
Basic Trading Signals
Buy Signal: Go long when the blue dotted gray line of the Kaufman Adaptive Moving Average Metatrader 4 custom indicator pops up on the activity chart.
Sell Signal: Go short when the red dotted gray line of the Kaufman Adaptive Moving Average Metatrader 4 custom indicator pops up on the activity chart.
Exit buy trade: Close all buy orders if while a bullish trend is ongoing, a red dot gets displayed on the gray line of the Kaufman Adaptive Moving Average indicator.
Exit sell trade: Close all sell orders if while a bearish trend is running, a blue dot gets on display on the gray line of the Kaufman Adaptive Moving Average indicator.
Tips: Just like with the moving average indicator, when the line of the Kaufman Adaptive Moving Average indicator ascends/descends, it is signaling a corresponding bullish/bearish price pattern.
It is important to also watch out for this in addition to the colored buy/sell dots.
MT4 Indicator Characteristics
Currency pairs: Any
Platform: Metatrader 4
Type: chart pattern indicator
Customization options: Variable (PeriodAMA, nfast, nslow, G, dK, Price Type, AMA_Trend_Type), 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 kaufman-adaptive-moving-average.ex4 indicator into the MQL4 indicators folder of the Metatrader 4 trading platform.
You can access this folder from the top menu as follows:
File > Open Data Folder > MQL4 > Indicators (paste here)