The RSI + Kaufman’s Adaptive Moving Average (KAMA) Strategy for Filtering Bad Trades

Last Updated on March 9, 2025 by Arif Chowdhury

Ever felt overwhelmed by the sheer number of trades out there?

Wondering why your winning streak suddenly turns into a series of unfortunate losses?

You’re not alone.

As a seasoned Forex trader since 2015, I’ve faced these challenges head-on.

Let’s dive into a strategy that can help you filter out those bad trades: The RSI + Kaufman’s Adaptive Moving Average (KAMA) Strategy.

Relative Strength Index (RSI) is a momentum oscillator that measures the speed and change of price movements.

It ranges from 0 to 100, helping traders identify overbought or oversold conditions.

On the other hand, Kaufman’s Adaptive Moving Average (KAMA) adjusts itself based on market volatility.

This means it reacts more quickly to price changes when the market is volatile and slows down during calmer periods.

Combining these two tools can enhance your trading decisions.

Filtering Noise: The RSI can help you avoid false signals that often lead to losing trades.
Adapting to Market Conditions: KAMA adjusts to the market, which means it helps you stay in trades longer when conditions are favorable.
Statistical Edge: Studies show that using multiple indicators, like RSI and KAMA, can improve trade accuracy by up to 20%.

Here’s a simple breakdown of how to use this strategy effectively:

Set Up Your Indicators:
- Add the RSI (set to 14 periods) to your chart.
- Add the KAMA (with a period of your choice, often around 10-20) to the same chart.
Identify Overbought and Oversold Levels:
- Look for RSI levels above 70 (overbought) and below 30 (oversold).
- This tells you when the market might reverse.
Confirm with KAMA:
- When the RSI signals overbought, check if the price is below the KAMA line.
- Conversely, if it’s oversold, see if the price is above the KAMA line.
- This dual confirmation helps filter out bad trades.
Enter Your Trades:
- For a buy: RSI is below 30 and the price crosses above KAMA.
- For a sell: RSI is above 70 and the price crosses below KAMA.
Manage Your Risk:
- Always set stop-loss orders to protect against unforeseen market moves.

Now, while this strategy is solid, I’ve taken things a step further by developing a portfolio of 16 sophisticated trading bots.

These bots utilize the RSI + KAMA strategy among other methods for optimal performance.

They’re designed to trade major currency pairs like EUR/USD, GBP/USD, USD/CHF, and USD/JPY.

With each pair having its unique set of bots, you get:

Diversification: Minimized correlated losses.
Long-term Focus: Targeting 200-350 pips for sustained profitability.
Robust Testing: Backtested over 20 years, performing well even in tough conditions.

And guess what? I’m offering this entire EA portfolio for FREE!

If you’re serious about taking your trading to the next level, check out my 16 trading bots portfolio.

Many traders get caught up in the excitement of the market and forget the basics.

Here are some common mistakes to avoid:

Ignoring Market Conditions: Always assess the market environment before entering trades.
Overtrading: Quality over quantity. Stick to your strategy.
Neglecting Risk Management: Always protect your capital.

To maximize the effectiveness of your trading strategy, selecting a reliable broker is crucial.

You want a broker with tight spreads, excellent execution speed, and solid customer support.

I’ve tested several brokers and recommend the best ones for your trading needs.

Check out my recommendations for top Forex brokers to ensure you’re trading with the best.

The RSI + Kaufman’s Adaptive Moving Average (KAMA) Strategy is a powerful tool for filtering bad trades.

By implementing this strategy, you can improve your trade accuracy and overall profitability.

Combine this with my 16 trading bots for a robust trading experience that minimizes risk and maximizes returns.

Remember, the journey of a trader is filled with learning and adaptation.

Stay informed, keep practicing, and watch your trading skills flourish.