Kaufman Indicator

Kaufman Indicator

The Kaufman indicator for MT4 that measures the market volatility defines the trend direction and reversal zones.

The Kaufman indicator for MetaTrader 4 is a trend-smoothing trading tool that is built with an optimized version of the Exponential Moving Average (EMA). It is a blend of the EMA and the Kaufman adaptive moving average to improve its efficiency in filtering out market noises and then identifying the primary trend direction.

What is Kaufman’s Adaptive Moving Average?
The Kaufman Adaptive Moving Average, otherwise known as the KAMA, is simply a moving average-based indicator that closely follows price movements and interprets market volatility.

Furthermore, the indicator was designed to react less to minor fluctuations in the market, thereby generating fewer but better signals. This makes it effective in identifying the trend direction and the potential reversal zone of the price.

This trend-following indicator depicts a bullish/bearish trend when the lines are moving to the upside/downside, respectively. Conversely, it suggests a potential trend reversal when the lines cross over each other. However, it is recommended to use the signals in synergy with price action/other technical indicators to confirm a buy/sell entry.

How to Trade With the Kaufman Indicator

The above image depicts the action of the indicator on a EURUSD currency pair in the H1 timeframe. It illustrates how to identify a high-probability trade signal/entry using the indicator and price action.

The image shows a buy signal. Firstly, it shows that the indicator’s lines have crossed, which suggests a possible bullish movement. Secondly, the price was also above the lines, which further indicates a bullish trend. Finally, the price created an order block, retested it, and printed a bullish candlestick, which confirms the buy entry.

Conclusion
The Kaufman indicator for MT4 is recommended for novice, intermediate, and advanced forex traders. What’s more is also suitable for scalpers, day/intraday, and swing traders. Finally, it is free to download.