{"id":31747,"date":"2026-11-12T11:33:17","date_gmt":"2026-11-12T11:33:17","guid":{"rendered":"https:\/\/wp-api.pocketful.in\/blog\/?p=31747"},"modified":"2026-11-12T11:33:18","modified_gmt":"2026-11-12T11:33:18","slug":"kaufman-adaptive-moving-average-kama","status":"publish","type":"post","link":"https:\/\/wp-api.pocketful.in\/blog\/kaufman-adaptive-moving-average-kama\/","title":{"rendered":"Kaufman&#8217;s Adaptive Moving Average (KAMA): Formula &amp; Strategies"},"content":{"rendered":"\n<p class=\"wp-block-paragraph\">Most traders in India start with the 20-day or 50-day moving average. These tools are simple, but they have one weakness. They move at the same speed whether the market is trending strongly or just going sideways. This is why they often lag in a good trend and give false signals in a choppy market.<\/p>\n\n\n\n<p class=\"wp-block-paragraph\">In today\u2019s blog, we explain what KAMA is, how its formula works, how to calculate the Efficiency Ratio, and the strategies traders can use on Nifty, Bank Nifty, and individual stocks.<\/p>\n\n\n\n<div id=\"ez-toc-container\" class=\"ez-toc-v2_0_65 counter-hierarchy ez-toc-counter ez-toc-transparent ez-toc-container-direction\">\n<div class=\"ez-toc-title-container\">\n<p class=\"ez-toc-title \" >Table of Contents<\/p>\n<span class=\"ez-toc-title-toggle\"><a href=\"#\" class=\"ez-toc-pull-right ez-toc-btn ez-toc-btn-xs ez-toc-btn-default ez-toc-toggle\" aria-label=\"Toggle Table of Content\"><span class=\"ez-toc-js-icon-con\"><span class=\"\"><span class=\"eztoc-hide\" style=\"display:none;\">Toggle<\/span><span class=\"ez-toc-icon-toggle-span\"><svg style=\"fill: #999;color:#999\" xmlns=\"http:\/\/www.w3.org\/2000\/svg\" class=\"list-377408\" width=\"20px\" height=\"20px\" viewBox=\"0 0 24 24\" fill=\"none\"><path d=\"M6 6H4v2h2V6zm14 0H8v2h12V6zM4 11h2v2H4v-2zm16 0H8v2h12v-2zM4 16h2v2H4v-2zm16 0H8v2h12v-2z\" fill=\"currentColor\"><\/path><\/svg><svg style=\"fill: #999;color:#999\" class=\"arrow-unsorted-368013\" xmlns=\"http:\/\/www.w3.org\/2000\/svg\" width=\"10px\" height=\"10px\" viewBox=\"0 0 24 24\" version=\"1.2\" baseProfile=\"tiny\"><path d=\"M18.2 9.3l-6.2-6.3-6.2 6.3c-.2.2-.3.4-.3.7s.1.5.3.7c.2.2.4.3.7.3h11c.3 0 .5-.1.7-.3.2-.2.3-.5.3-.7s-.1-.5-.3-.7zM5.8 14.7l6.2 6.3 6.2-6.3c.2-.2.3-.5.3-.7s-.1-.5-.3-.7c-.2-.2-.4-.3-.7-.3h-11c-.3 0-.5.1-.7.3-.2.2-.3.5-.3.7s.1.5.3.7z\"\/><\/svg><\/span><\/span><\/span><\/a><\/span><\/div>\n<nav><ul class='ez-toc-list ez-toc-list-level-1 ' ><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-1\" href=\"https:\/\/wp-api.pocketful.in\/blog\/kaufman-adaptive-moving-average-kama\/#What_is_Kaufman_Adaptive_Moving_Average\" title=\"What is Kaufman Adaptive Moving Average&nbsp;\">What is Kaufman Adaptive Moving Average&nbsp;<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-2\" href=\"https:\/\/wp-api.pocketful.in\/blog\/kaufman-adaptive-moving-average-kama\/#The_Basic_Idea\" title=\"The Basic Idea\">The Basic Idea<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-3\" href=\"https:\/\/wp-api.pocketful.in\/blog\/kaufman-adaptive-moving-average-kama\/#How_does_the_KAMA_Indicator_Work\" title=\"How does the KAMA Indicator Work?\">How does the KAMA Indicator Work?<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-4\" href=\"https:\/\/wp-api.pocketful.in\/blog\/kaufman-adaptive-moving-average-kama\/#Formula\" title=\"Formula&nbsp;\">Formula&nbsp;<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-5\" href=\"https:\/\/wp-api.pocketful.in\/blog\/kaufman-adaptive-moving-average-kama\/#Components_of_the_Formula\" title=\"Components of the Formula&nbsp;\">Components of the Formula&nbsp;<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-6\" href=\"https:\/\/wp-api.pocketful.in\/blog\/kaufman-adaptive-moving-average-kama\/#How_to_Calculate_Efficiency_Ratio\" title=\"How to Calculate Efficiency Ratio\">How to Calculate Efficiency Ratio<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-7\" href=\"https:\/\/wp-api.pocketful.in\/blog\/kaufman-adaptive-moving-average-kama\/#KAMA_Strategies\" title=\"KAMA Strategies&nbsp;\">KAMA Strategies&nbsp;<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-8\" href=\"https:\/\/wp-api.pocketful.in\/blog\/kaufman-adaptive-moving-average-kama\/#Conclusion\" title=\"Conclusion&nbsp;\">Conclusion&nbsp;<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-9\" href=\"https:\/\/wp-api.pocketful.in\/blog\/kaufman-adaptive-moving-average-kama\/#Frequently_Asked_Questions_FAQs\" title=\"Frequently Asked Questions (FAQs)\">Frequently Asked Questions (FAQs)<\/a><\/li><\/ul><\/nav><\/div>\n<h2 id=\"h-what-is-kaufman-adaptive-moving-average-nbsp\" class=\"wp-block-heading\"><span class=\"ez-toc-section\" id=\"What_is_Kaufman_Adaptive_Moving_Average\"><\/span>What is Kaufman Adaptive Moving Average&nbsp;<span class=\"ez-toc-section-end\"><\/span><\/h2>\n\n\n\n<p class=\"wp-block-paragraph\">KAMA is a moving average that changes its speed depending on how the market is behaving. It was created by Perry Kaufman and works differently from the usual moving averages that traders use on Indian charts, like the 20-day or 50-day SMA and EMA.<\/p>\n\n\n\n<h2 id=\"h-the-basic-idea\" class=\"wp-block-heading\"><span class=\"ez-toc-section\" id=\"The_Basic_Idea\"><\/span>The Basic Idea<span class=\"ez-toc-section-end\"><\/span><\/h2>\n\n\n\n<p class=\"wp-block-paragraph\">A regular moving average has a fixed speed. If you pick a 20-period average, it treats a sideways market and a strong trending market in the same way. This causes problems. In a trending market, it can be slow, and in a choppy market, it keeps giving false signals.<\/p>\n\n\n\n<p class=\"wp-block-paragraph\">Kaufman Moving Average tries to solve this problem. It speeds up when price moves smoothly in one direction and slows down when it moves up and down without a clear direction.&nbsp;<\/p>\n\n\n\n<h2 id=\"h-how-does-the-kama-indicator-work\" class=\"wp-block-heading\"><span class=\"ez-toc-section\" id=\"How_does_the_KAMA_Indicator_Work\"><\/span>How does the KAMA Indicator Work?<span class=\"ez-toc-section-end\"><\/span><\/h2>\n\n\n\n<p class=\"wp-block-paragraph\">KAMA depends on a measure called the Efficiency Ratio (ER). It checks how much of the price movement is actual progress and how much is just noise.<\/p>\n\n\n\n<ul class=\"wp-block-list\">\n<li>Efficiency Ratio = Net price change \u00f7 Total price movement over a chosen period.<\/li>\n\n\n\n<li>If the stock moves steadily upward, the ratio is close to 1. This means a clear trend.<\/li>\n\n\n\n<li>If the stock keeps jumping up and down and ends near where it started, the ratio is close to 0. This means a noisy market.<\/li>\n<\/ul>\n\n\n\n<p class=\"wp-block-paragraph\">The ER is then used to adjust a smoothing constant. A high ER makes KAMA behave like a fast moving average. A low ER makes it behave like a slow one.<\/p>\n\n\n\n<p class=\"wp-block-paragraph\">The common default settings are 10 periods for the efficiency ratio, 2 for the fast smoothing, and 30 for the slow smoothing.<\/p>\n\n\n\n<h2 id=\"h-formula-nbsp\" class=\"wp-block-heading\"><span class=\"ez-toc-section\" id=\"Formula\"><\/span>Formula&nbsp;<span class=\"ez-toc-section-end\"><\/span><\/h2>\n\n\n\n<p class=\"wp-block-paragraph\">KAMA is calculated in three steps.&nbsp;<\/p>\n\n\n\n<p class=\"wp-block-paragraph\">Find the Efficiency Ratio, then you convert it into a smoothing constant, and finally you put that into the KAMA equation.<\/p>\n\n\n\n<p class=\"wp-block-paragraph\">KAMA (today) = KAMA (yesterday) + SC * (Price &#8211; KAMA (yesterday))<\/p>\n\n\n\n<p class=\"wp-block-paragraph\">Here, SC is the Smoothing Constant, which is worked out like this:<\/p>\n\n\n\n<p class=\"wp-block-paragraph\">SC = [ER * (Fast SC \u2212 Slow SC) + Slow SC]^2<\/p>\n\n\n\n<p class=\"wp-block-paragraph\">Where:<\/p>\n\n\n\n<ul class=\"wp-block-list\">\n<li>Fast SC = 2 \/ (2 + 1) = 0.6667<\/li>\n\n\n\n<li>Slow SC = 2 \/ (30 + 1) = 0.0645<\/li>\n<\/ul>\n\n\n\n<p class=\"wp-block-paragraph\">The first KAMA value has no previous value to build on, so most platforms start it with a simple moving average or with the closing price of that day.<\/p>\n\n\n\n<h2 id=\"h-components-of-the-formula-nbsp\" class=\"wp-block-heading\"><span class=\"ez-toc-section\" id=\"Components_of_the_Formula\"><\/span>Components of the Formula&nbsp;<span class=\"ez-toc-section-end\"><\/span><\/h2>\n\n\n\n<p class=\"wp-block-paragraph\">Price: This is usually the closing price of the stock or index for the period.<\/p>\n\n\n\n<p class=\"wp-block-paragraph\">KAMA (yesterday): The previous KAMA value.&nbsp;<\/p>\n\n\n\n<ul class=\"wp-block-list\">\n<li><strong>Efficiency Ratio:<\/strong> It is the main part, and a number between 0 and 1 that tells how trending the market is.<\/li>\n\n\n\n<li><strong>Slow SC: <\/strong>The slowest speed KAMA can move at. With the default setting of 30 periods, it behaves like a slow EMA during rough market phases.<\/li>\n\n\n\n<li><strong>Smoothing Constant (SC): <\/strong>The final weight given to the latest price. A larger SC means KAMA follows the price closely. A smaller SC means it barely moves. The result is squared so that the line becomes much slower in noisy markets and cuts out more false signals.<\/li>\n\n\n\n<li><strong>Efficiency Ratio period: <\/strong>The number of candles used to measure the trend. The default is 10.<\/li>\n<\/ul>\n\n\n\n<p class=\"wp-block-paragraph\"><strong>Read Also:<\/strong> <a href=\"https:\/\/www.pocketful.in\/blog\/power-of-compounding\/\">What is the Power of Compounding?<\/a><\/p>\n\n\n\n<h2 id=\"h-how-to-calculate-efficiency-ratio\" class=\"wp-block-heading\"><span class=\"ez-toc-section\" id=\"How_to_Calculate_Efficiency_Ratio\"><\/span>How to Calculate Efficiency Ratio<span class=\"ez-toc-section-end\"><\/span><\/h2>\n\n\n\n<p class=\"wp-block-paragraph\"><strong>ER = Direction \/ Volatility<\/strong><\/p>\n\n\n\n<p class=\"wp-block-paragraph\">Direction is the absolute difference between today&#8217;s close and the close 10 periods ago. Volatility is the sum of the absolute price changes for each of those 10 periods.<\/p>\n\n\n\n<p class=\"wp-block-paragraph\"><strong>Example: <\/strong>A stock closed at \u20b9100 ten days ago and \u20b9110 today. During these 10 days, the daily moves added up to \u20b925&nbsp;<\/p>\n\n\n\n<ul class=\"wp-block-list\">\n<li><strong>Direction<\/strong> = (110 &#8211; 100) = \u20b910<\/li>\n\n\n\n<li><strong>Volatility<\/strong> = \u20b925<\/li>\n\n\n\n<li><strong>ER = 10 \/ 25<\/strong> = 0.4<\/li>\n<\/ul>\n\n\n\n<p class=\"wp-block-paragraph\">An ER of 0.4 means the market moved in a mixed way, with some trend and a fair amount of noise.<\/p>\n\n\n\n<p class=\"wp-block-paragraph\"><strong>How to Read the ER<\/strong><\/p>\n\n\n\n<ul class=\"wp-block-list\">\n<li><strong>ER close to 1: <\/strong>Price moved almost in a straight line. KAMA becomes fast.<\/li>\n\n\n\n<li><strong>ER close to 0: <\/strong>Price went up and down and made little progress. KAMA becomes slow.<\/li>\n<\/ul>\n\n\n\n<h2 id=\"h-kama-strategies-nbsp\" class=\"wp-block-heading\"><span class=\"ez-toc-section\" id=\"KAMA_Strategies\"><\/span>KAMA Strategies&nbsp;<span class=\"ez-toc-section-end\"><\/span><\/h2>\n\n\n\n<h3 id=\"h-1-price-and-kama-crossover\" class=\"wp-block-heading has-medium-font-size\">1. Price and KAMA Crossover<\/h3>\n\n\n\n<p class=\"wp-block-paragraph\">This is the easiest way to use KAMA. For the buy signal, the price closes above the KAMA line, and for a sell or exit signal, the price closes below the KAMA line.<\/p>\n\n\n\n<h3 id=\"h-2-kama-slope-strategy\" class=\"wp-block-heading has-medium-font-size\">2. KAMA Slope Strategy<\/h3>\n\n\n\n<p class=\"wp-block-paragraph\">In this strategy, the direction of the line matters more than the crossover.<\/p>\n\n\n\n<ul class=\"wp-block-list\">\n<li>If KAMA is rising, the trend is up, and traders look only for buying opportunities.<\/li>\n\n\n\n<li>If KAMA is falling, the trend is down, and traders look only for selling opportunities.<\/li>\n\n\n\n<li>If KAMA is flat, the market is moving sideways, and most traders stay out.<\/li>\n<\/ul>\n\n\n\n<p class=\"wp-block-paragraph\">For example, on a daily Nifty chart, you may decide to take long trades only when KAMA is sloping upward.<\/p>\n\n\n\n<h3 id=\"h-3-two-kama-crossover\" class=\"wp-block-heading has-medium-font-size\">3. Two KAMA Crossover<\/h3>\n\n\n\n<p class=\"wp-block-paragraph\">In this method, two KAMA lines with different settings are used together.<\/p>\n\n\n\n<ul class=\"wp-block-list\">\n<li>A fast KAMA (for example, ER period 10) and a slow KAMA (for example, ER period 30).<\/li>\n\n\n\n<li>Buy when the fast KAMA crosses above the slow KAMA.<\/li>\n\n\n\n<li>Sell when the fast KAMA crosses below the slow KAMA.<\/li>\n<\/ul>\n\n\n\n<h3 id=\"h-4-kama-with-rsi\" class=\"wp-block-heading has-medium-font-size\">4. KAMA with RSI<\/h3>\n\n\n\n<p class=\"wp-block-paragraph\">If you combine KAMA with a momentum indicator, it helps confirm the signal.<\/p>\n\n\n\n<ul class=\"wp-block-list\">\n<li>It is a buy when the price is above a rising KAMA, and RSI is above 50.<\/li>\n\n\n\n<li>It is a sell when the price is below a falling KAMA, and RSI is below 50.<\/li>\n<\/ul>\n\n\n\n<h3 id=\"h-5-kama-with-volume\" class=\"wp-block-heading has-medium-font-size\">5. KAMA with Volume<\/h3>\n\n\n\n<p class=\"wp-block-paragraph\">A breakout above KAMA with higher-than-average volume is usually more reliable than one with weak volume. Traders in stocks and Bank Nifty often use this to avoid weak moves that fade quickly.<\/p>\n\n\n\n<h2 id=\"h-conclusion-nbsp\" class=\"wp-block-heading\"><span class=\"ez-toc-section\" id=\"Conclusion\"><\/span>Conclusion&nbsp;<span class=\"ez-toc-section-end\"><\/span><\/h2>\n\n\n\n<p class=\"wp-block-paragraph\">It is a great indicator for traders who wish to have a moving average that moves with the market rather than remaining fixed. It adjusts the speed by the Efficiency Ratio, and it closely follows the trends during strong trends, and it remains calm during sideways phases, which can help reduce false signals. Before trading with real money, test the settings on past data of the stocks or indices you follow. Start with a simple crossover or slope method and then move forward as you gain experience.<\/p>\n\n\n\n<figure class=\"wp-block-table has-small-font-size\"><table><thead><tr><th class=\"has-text-align-left\" data-align=\"left\">S.NO.<\/th><th class=\"has-text-align-left\" data-align=\"left\">Check Out These Interesting Posts You Might Enjoy!<\/th><\/tr><\/thead><tbody><tr><td class=\"has-text-align-left\" data-align=\"left\">1<\/td><td class=\"has-text-align-left\" data-align=\"left\"><a href=\"https:\/\/www.pocketful.in\/blog\/calculate-stock-volatility-in-excel\/\">How to Calculate Stock Volatility in Excel?<\/a><\/td><\/tr><tr><td class=\"has-text-align-left\" data-align=\"left\">2<\/td><td class=\"has-text-align-left\" data-align=\"left\"><a href=\"https:\/\/www.pocketful.in\/blog\/trading\/nifty-options-profit-loss-formula\/\">Nifty Options Profit &amp; Loss Formula \u2013 Calculate P&amp;L<\/a><\/td><\/tr><tr><td class=\"has-text-align-left\" data-align=\"left\">3<\/td><td class=\"has-text-align-left\" data-align=\"left\"><a href=\"https:\/\/www.pocketful.in\/blog\/mutual-funds\/what-is-basis-point\/\">What is a Basis Point (BPS)?<\/a><\/td><\/tr><tr><td class=\"has-text-align-left\" data-align=\"left\">4<\/td><td class=\"has-text-align-left\" data-align=\"left\"><a href=\"https:\/\/www.pocketful.in\/blog\/explainer-on-liquidity-ratios-types-importance-and-formulas\/\">Explainer on Liquidity Ratios: Types, Importance, and Formula<\/a><\/td><\/tr><tr><td class=\"has-text-align-left\" data-align=\"left\">5<\/td><td class=\"has-text-align-left\" data-align=\"left\"><a href=\"https:\/\/www.pocketful.in\/blog\/mutual-funds\/best-swp-for-monthly-income-in-india\/\">Best SWP for Monthly Income in India<\/a><\/td><\/tr><\/tbody><\/table><\/figure>\n\n\n\n<h2 id=\"h-frequently-asked-questions-faqs\" class=\"wp-block-heading\"><span class=\"ez-toc-section\" id=\"Frequently_Asked_Questions_FAQs\"><\/span>Frequently Asked Questions (FAQs)<span class=\"ez-toc-section-end\"><\/span><\/h2>\n\n\n<div class=\"saswp-faq-block-section\"><ol style=\"list-style-type:none\"><li style=\"list-style-type: none\"><h3 class=\"\">What are the default settings of KAMA?<\/h3><p class=\"saswp-faq-answer-text\">The common default settings are 10 for the Efficiency Ratio period, 2 for the fast smoothing, and 30 for the slow smoothing.<\/p><li style=\"list-style-type: none\"><h3 class=\"\">How is KAMA different from EMA?<\/h3><p class=\"saswp-faq-answer-text\">An EMA has a fixed speed, while KAMA changes its speed depending on the Efficiency Ratio, which helps KAMA reduce false signals in sideways markets.<\/p><li style=\"list-style-type: none\"><h3 class=\"\">Can KAMA be used for intraday trading?<\/h3><p class=\"saswp-faq-answer-text\">Yes. Traders use it on intraday charts of Nifty, Bank Nifty, and liquid stocks, as well as on daily and weekly charts.<\/p><li style=\"list-style-type: none\"><h3 class=\"\">Is KAMA a leading or lagging indicator?<\/h3><p class=\"saswp-faq-answer-text\">KAMA is a lagging indicator. It reacts after the price has moved, but it lags less than a normal moving average during strong trends.<\/p><li style=\"list-style-type: none\"><h3 class=\"\">Is KAMA enough to trade on its own?<\/h3><p class=\"saswp-faq-answer-text\">No single indicator is reliable on its own. KAMA works better when combined with other tools and proper risk management, including a stop-loss.<\/p><\/ul><\/div>\n\n\n<p class=\"wp-block-paragraph\"><\/p>\n","protected":false},"excerpt":{"rendered":"<p>Most traders in India start with the 20-day or 50-day moving average. These tools are simple, but they have one weakness. They move at the same speed whether the market is trending strongly or just going sideways. This is why they often lag in a good trend and give false signals in a choppy market. [&hellip;]<\/p>\n","protected":false},"author":11,"featured_media":31762,"comment_status":"closed","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"_acf_changed":false,"inline_featured_image":false,"is_paper_insight":false,"paper_insight_image":0,"paper_insight_pdf":0,"paper_insight_ppt":0,"footnotes":""},"categories":[15],"tags":[],"class_list":["post-31747","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-investing"],"acf":{"freelancer":"Harjyot"},"yoast_head":"<!-- This site is optimized with the Yoast SEO Premium plugin v20.13 (Yoast SEO v21.2) - https:\/\/yoast.com\/wordpress\/plugins\/seo\/ -->\n<title>Kaufman&#039;s Adaptive Moving Average (KAMA): Formula &amp; Strategies<\/title>\n<meta name=\"description\" content=\"Understand what the KAMA indicator is, its formula, Efficiency Ratio calculation, default settings, and trading strategies for Nifty, Bank Nifty, and stocks.\" \/>\n<meta name=\"robots\" content=\"noindex, follow, max-snippet:-1, max-image-preview:large, max-video-preview:-1\" \/>\n<meta property=\"og:locale\" content=\"en_US\" \/>\n<meta property=\"og:type\" content=\"article\" \/>\n<meta property=\"og:title\" content=\"Kaufman&#039;s Adaptive Moving Average (KAMA): Formula &amp; 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