Sunday, April 29, 2012

MT4 indicator (Kaufman3.mq4)

How to trade with Kaufman3.mq4 indicator

Kaufman3 indicator adds an extra exponential moving average to the KAMA value.

It may be interesting as a basis for a trend following indicator.

Try on 1H or 4H charts, with various parameters. 

periodAMA = 6; - length of time to compute signal-to-noise ratio
nfast = 2; - EMA length with high signal to noise
nslow = 60; - EMA length with lowest signal to noise
G = 2.5; - nonlinear squashing

Kaufman indicator uses 2 moving averages, which are a bit more descriptive than regular MAs.

The basic application of the Kaufman indicator is to spot a short term trend and trade with it. When Kaufman indicator lines cross a trend changes. Once a price candle is trading clearly outside both Kaufman lines (below lines - for downtrend, above - for an uptrend), the sight is clear to take a trade.

Another advantage of Kaufman moving averages is that they quickly react to pausing trends by immediately going flat (check the behaviour of the green line on the screen shot above). When Kaufman moving average goes flat, traders should be looking to take partial profits from their trades because a trend could end there, the remaining position should be kept open in case the trend continues and be closed with either the cross of Kaufman lines, or, better off, with the first candlestick trading inside the lines (remember the first rule about entries : "candle outside Kaufman lines").

Forex MT4 indicator Kaufman3 Download indicator: Kaufman3.mq4


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