While Moving Average is a very good tool, it suffers when market situation changes. If the price is changed rapidly with a lot of noises, the MA may generate wrong trading signals.

Many adaptive methods had been created, it tried to vary the length of the moving average to better cope with the market situation. Kaufman’s moving average, KAMA, is based on the concept that a noisy market requires a slower trend than one with less noise.

Look at this stock with 10day SMA:

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20 day SMA:

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30 day SMA:

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50 day SMA

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KAMA:

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KAMA seems able to follow the trend closely but less affected by the minor noises. It seems as smooth as a 50 day SMA at the same time follow the major price trend more timely.

It needs more verification on actual trading performance. It looks better than it performs, from my observations.

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