Thread: Kaufman Efficiency Ratio - Vertex FX Indicator

Kaufman Efficiency Ratio is a powerful VertexFX client side VTL indicator that provides the strength of the current trend. It is the ratio of the relative market speed to that of the volatility.
It is scaled between 0 and +1.0. A low value near 0 implies low efficient and hence lower choppiness. A high value above 0.5 implies higher choppiness in the markets. It is used by traders as a filter to avoid trading when the market is choppy or during flat ranging markets.
To calculate the ratio we first calculate the net price movement (NPM) over the recent PERIOD bars. It is the defined as the absolute difference between the current close and the close PERIOD bars ago.
This value is divided by the volatility over the recent PERIOD bars. The volatility is calculated as the absolute sum of the change in price over PERIOD bars.
The Kaufman Efficiency Ratio is calculated by dividing the net price movement by the volatility.
BUY - This indicator does not provide BUY / SELL signals.
SELL - This indicator does not provide BUY / SELL signals.