Enhanced Kaufman Adaptive Moving Average (KAMA) with Bollinger B

27 nov 2024

# Enhanced Kaufman Adaptive Moving Average (KAMA) with Bollinger Bands

## Overview
This indicator combines the Kaufman Adaptive Moving Average (KAMA) with Bollinger Bands to create a comprehensive trading system. It provides adaptive trend following capabilities while measuring market volatility and potential reversal points.

## Key Features
- Adaptive moving average that adjusts to market conditions
- Dynamic Bollinger Bands for volatility measurement
- Color-coded KAMA line indicating trend direction
- Integrated buy/sell signals based on multiple confirmations
- Customizable parameters for both KAMA and Bollinger Bands
- Optional bar confirmation wait feature
- Built-in alert conditions for trade signals

## Main Components

### 1. Kaufman Adaptive Moving Average (KAMA)
- Adapts to market volatility using an efficiency ratio
- Changes color based on trend direction (green for uptrend, red for downtrend)
- Adjustable parameters for fine-tuning:
- Base Length: Controls the main calculation period (default: 10)
- Fast EMA Length: For rapid market response (default: 2)
- Slow EMA Length: For stable market conditions (default: 30)

### 2. Bollinger Bands
- Standard deviation-based volatility bands
- Customizable length and standard deviation multiplier
- Includes expansion threshold for volatility measurement
- Components:
- Upper Band: Upper volatility threshold
- Middle Band: Simple moving average
- Lower Band: Lower volatility threshold

## Signal Generation

### Buy Signals
Generated when:
1. KAMA color changes from red to green
2. Price closes above KAMA
3. Price closes above the middle Bollinger Band
4. Signals are marked with:
- Green triangles below the candles
- "B" labels for easy identification

### Sell Signals
Generated when:
1. KAMA color changes from green to red
2. Price closes below KAMA
3. Price closes below the middle Bollinger Band
4. Signals are marked with:
- Red triangles above the candles
- "S" labels for easy identification

## Customizable Parameters

### KAMA Settings
- Base Length (1-50)
- Fast EMA Length (1-10)
- Slow EMA Length (10-50)
- Source Price Selection
- Direction Highlight Toggle
- Bar Confirmation Option

### Bollinger Bands Settings
- Length (default: 20)
- Standard Deviation Multiplier (default: 2.0)
- Expansion Threshold (0.1-3.0)

## Alert Functionality
Built-in alerts for:
- Buy signals with customizable messages
- Sell signals with customizable messages

## Best Practices

### Timeframe Selection
- Works well on multiple timeframes
- Recommended for 15m to 4h charts for optimal signal generation
- Higher timeframes provide more reliable trend signals

### Parameter Optimization
- Adjust KAMA lengths based on trading style:
- Shorter lengths for day trading
- Longer lengths for swing trading
- Fine-tune BB multiplier based on market volatility
- Consider waiting for bar confirmation in volatile markets

### Risk Management
- Use in conjunction with other indicators for confirmation
- Consider market conditions and volatility when trading signals
- Implement proper position sizing and stop-loss levels

## Technical Notes
- Written in Pine Script™ v6
- Overlay indicator (displays on price chart)
- Compatible with all TradingView-supported markets
- Resource-efficient implementation for smooth performance

## Disclaimer
This indicator is provided under the Mozilla Public License 2.0. While it can be a valuable tool for technical analysis, it should not be used as the sole basis for trading decisions. Always combine with proper risk management and additional analysis methods.