OPEN-SOURCE SCRIPT

Kaufman Adaptive Least Squares Moving Average

Introduction

It is possible to use a wide variety of filters for the estimation of a least squares moving average, one of the them being the Kaufman adaptive moving average (KAMA) which adapt to the market trend strength, by using KAMA in an lsma we therefore allow for an adaptive low lag filter which might provide a smarter way to remove noise while preserving reactivity.

The Indicator

The lsma aim to minimize the sum of the squared residuals, paired with KAMA we obtain a great adaptive solution for smoothing while conserving reactivity. Length control the period of the efficiency ratio used in KAMA, higher values of length allow for overall smoother results. The pre-filtering option allow for even smoother results by using KAMA as input instead of the raw price.

imagen

The proposed indicator without pre-filtering in green, a simple moving average in orange, and a lsma with all of them length = 200. The proposed filter allow for fast and precise crosses with the moving average while eliminating major whipsaws.

imagen

Same setup with the pre-filtering option, the result are overall smoother.

Conclusion

The provided code allow for the implementation of any filter instead of KAMA, try using your own filters. Thanks for reading :)
adaptiveefficiencyratioKaufman's Adaptive Moving Average (KAMA)leastsquaresLeast Squares Moving Average (LSMA)Moving AveragesTrend Analysiszerolag

Script de código abierto

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