The Adaptive Moving Average (AMA) is a dynamic forex indicator that adjusts its sensitivity based on market conditions, making it ideal for trend-following strategies. In this guide, we’ll explore how AMA works, its advantages, and the best trading strategies to use it effectively.
The Adaptive Moving Average (AMA), developed by Perry Kaufman, is a trend-following moving average that adapts to market volatility. Unlike a traditional SMA or EMA, the AMA becomes more sensitive in trending markets and less sensitive in ranging markets, reducing false signals.
The AMA formula is as follows:
AMA = AMA_previous + α × (Price – AMA_previous)
Where:
The AMA helps traders determine the overall market trend:
Recommended AMA Settings:
Using multiple AMA lines of different periods can generate trade signals:
Best AMA Combinations:
Pairing AMA with the Relative Strength Index (RSI) improves trade confirmation:
✅ Pros:
❌ Cons:
The Adaptive Moving Average (AMA) is a smart, flexible indicator that adjusts to changing market conditions. It helps traders reduce lag in trends while filtering out noise in sideways markets.
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