The AMA indicator for MetaTrader 4 is short for Adaptive Moving Average, a technical study designed by Perry Kaufman, hence it is termed the Kaufman’s Adaptive Moving Average.
The AMA indicator was developed to act like a moving average, but also as a tool to measure the degree of noise found in the trend and adjust appropriately. The speed of the AMA indicator can automatically realign in respect to market volatility.
The AMA indicator was used as a replacement for the ordinary Moving Average during its presentation in 1995. The AMA indicator became superior to all other tries to develop an efficient and intelligent moving average due to its increased user control.
Ultimately, when the market is strongly trending and we experience some counter-trend moves or pullbacks, or little noise, the trader would love to have the Moving Average align closely with price action, and you’ll evidently want to see a smaller trackback session.
Conversely, if we’re in a range-bound market and the market is characterized by bars that cancel each other out, what you want is a moving average that is made up of longer historical period, so it can smoothen price out and dodge false triggers.
To arrive at the AMA indicator Kaufman had to modify the Exponential Moving Average with an algorithm that sets the smoothing constant of the EMA relative to the market volatility and direction ratio, making it now reactive to volatility and trend.
When price trades above Sienna colored line with DeepSkyBlue dots, it is said to be in a bullish trend, while if price trades below the Sienna colored line with gold colored dots, price is believed to be bearish.
MT4 Indicator Characteristics
Currency pairs: Any
Platform: Metatrader 4
Type: chart pattern indicator
Customization options: Variable (periodAMA, nfast, nslow, G, dK), Colors, width & Style.
Time frames: 5-Minutes, 15-Minutes, 30-Minutes, 1-Hour, 4-Hours, 1-Day, 1-Week
Type: pattern & support/resistance