The Adaptive Moving Average (AMA) is a technical indicator used in financial analysis to smooth out price data and identify trends in a more responsive way compared to traditional moving averages. It dynamically adjusts its sensitivity to market conditions.

The AMA calculates its value based on recent price data and adapts its smoothing factor to current market volatility. During periods of high volatility, the AMA puts more weight on recent price movements, allowing it to respond quickly to changes. Conversely, in low volatility periods, the AMA reduces its sensitivity to minor price fluctuations, resulting in a smoother average.

By dynamically adapting to market conditions, the AMA aims to provide a more accurate representation of the current trend and reduce false signals. Traders and analysts can use the AMA to identify potential entry or exit points in the market, as well as gauge the strength and direction of a trend.

It is worth noting that the Adaptive Moving Average is just one of many technical indicators available, and its effectiveness may vary depending on the specific market and trading strategies employed. Traders often combine the AMA with other indicators and analysis techniques to make more informed decisions.