The Efficiency Ratio (ER) was first presented by Perry Kaufman in his 1995 book ‘Smarter Trading‘. It is calculated by dividing the price change over a period by the absolute sum of the price movements that occurred to achieve that change. The resulting ratio ranges between 0 and 1 with higher values representing a more efficient or trending market.
The Kaufman Eifficiency Ratio is also know as Fractal Efficiency. It can be used as a filter to differentiate between trending conditions and sideways markets.
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// parameter // n = 10 Change = ABS(close - close[n]) calc = ABS(close-close[1]) volat = summation[n](calc) ER = Change / volat RETURN ER as "Kaufman's Efficiency Ratio" |
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