Adaptive Moving Average

Adaptive Moving Average (AMA) Technical Indicator

The Adaptive Moving Average (AMA) Technical Indicator is a moving average that reduces sensitivity to price series noises and has minimal lag for trend detection. It was developed by Perry Kaufman in his book Smarter Trading.

Eliminating Disadvantages of Smoothing Algorithms

Many smoothing algorithms for price series can result in false trend signals due to accidental price leaps. Additionally, smoothing introduces lag in detecting trend stops or changes. The AMA indicator was specifically designed to address these disadvantages.

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AMA 10 EURUSD · H1

AMA stays flat while the market moves sideways and follows the price closely once the trend starts.

Calculation of AMA

ER = ABS(CLOSE(i) - CLOSE(i - N)) / SUM(ABS(CLOSE(i) - CLOSE(i - 1)), N)
SSC = ER * (FAST - SLOW) + SLOW
AMA(i) = AMA(i - 1) + SSC^2 * (CLOSE(i) - AMA(i - 1))

Where:

• ER is the efficiency ratio: close to 1 in a strong trend and close to 0 in a sideways market;
• N is the AMA period (10 by default);
• FAST is 2 / (fast EMA period + 1) and SLOW is 2 / (slow EMA period + 1), with periods 2 and 30 by default;
• SSC is the scaled smoothing constant.