Theory:
In this edition, we're diving into the world of Adaptive Moving Averages (AMA). This concept was introduced by Vitali Apirine, who builds upon Perry Kaufman's well-known KAMA (Kaufman Adaptive Moving Average). Apirine’s enhanced version takes into account where the closing price sits within the high-low range, ensuring a more responsive moving average.
The trading system he proposes cleverly combines both the AMA and KAMA. This duo can help minimize whipsaws—those pesky false signals that can lead to unnecessary losses—compared to using either moving average on its own.
Usage:
When using the AMA, keep an eye out for color changes, as these serve as your trading signals. The best part? These color changes don’t repaint, meaning you can trust the signals you see on your chart.
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