Articles

KAMA is a trend-following indicator that aims to serve multiple missions, for example, to identify the trend and estimate key time turning points.

Introduction to Kaufman's Adaptive Moving Average

Kaufman's Adaptive Moving Average (KAMA) is designed to evaluate market noise and market volatility. The indicator was developed by Perry Kaufman in 1995 {Smarter Trading, Improving Performance in Changing Markets. New York: McGraw-Hill, Inc.}. You can use the KAMA indicator when trading with the MT4/MT5 platforms.

KAMA Settings

The recommended settings by Perry Kaufman include KAMA(10,2,30).

There are two ways to use KAMA:

(i) A longer-term KAMA to define the overall trend (10,5,30)

(ii) A shorter-term KAMA for trading signals (10,2,30)

The second (shorter-term) KAMA can generate trade signals when the price crosses above/below KAMA.

News-Trading in the Foreign Exchange Market and Economic Indicators

Economic indicators are periodic economic statistics that provide insight into the performance of an economy during a certain period. Any change in the macroeconomic conditions can trigger strong movements in the financial markets, and that means profit opportunities for currency traders. News trading is the process of linking macroeconomic events to strong price movements.

Categorizing Economic Indicators by their Release-Time

There are three types based on their timing:

1. Leading Indicator (Before the Economy)

Leading indicators change before the economy changes. A leading indicator can be used as a signal of new upcoming macro conditions. For example, the Consumer Confidence Index and the Home Sales Report.

2. Coincident Indicator (At the same time)

A Coincident Indicator changes at the same time as the economy (i.e. Gross Domestic Product).

Forex Institutional Trading, Order Flows, and Stop-Hunts

If you are a retail trader, understanding the role of Institutional Trading is the same as a little Penguin knows when and where the white sharks go for hunting. This little information can save its life numerous times.

Profiling Institutional Traders

Institutional traders are large players managing great sums of trading capital. They include Investment Banks, Hedge Funds, Mutual Funds, Investment Firms, and some large Commercial Corporations. Institutional traders can manage their funds but also their clients’ funds. The Euromoney Survey can provide a good insight into the top institutional players in the Forex market.

The Euromoney Forex Survey

According to the 2017 Euromoney Foreign Exchange survey, Citigroup continues to hold the top ranking amongst currency trading companies. Note that the market share of the top five (5) global banks has diminished to 41.1% compared to 61.5% in 2009.

Foreign Exchange Market Volumes

Volume is a leading market indicator that can help traders to recognize strong trends and reversals, but also to identify the current market phase and to think ahead of the current price action.

In general, analyzing market volumes can be helpful in:

• Evaluating the strength of a price trend

• Confirming the breakout of a key support/resistance level

• Recognizing the market phases of accumulation/distribution

• Indicating signs of potential price reversal

• Optimizing the time to enter/exit the market