Fabii Kaufman Efficiency Ratio
- Indicators
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Fabien Georges Andre Guillemaud
I develop custom indicators and trading tools for MetaTrader 5. - Version: 4.0
See at a glance whether price is trending or just moving in noise, on one line from 0 to 1. No repaint.
Any pair, any timeframe. On your chart in 2 minutes. Free demo in the Strategy Tester.
Get more indicators here
Baselines, volatility filters and oscillators. No repaint.
Why you need it
You see a clean move on the chart and you enter. A few bars later price stalls, drifts sideways and takes you out. The move looked like a trend, but most of it was back and forth. Direction alone does not tell you how much of the price travel was real progress.
Every entry taken in noise costs you a stop that did not need to happen.
What you get
Fabii Kaufman Efficiency Ratio shows you how much of the recent price travel was a straight move, so you stop treating noise as a trend.
- One reading from 0 to 1 on any pair and timeframe, so you judge every market on the same scale.
- Three zone colors, Red below 0.30, Gold in between and Green above 0.50, so you read the market state without looking at a number.
- Line, histogram or both in the indicator window, so you keep the display you prefer.
- An optional higher timeframe reading drawn on your current chart, so you check the larger context without switching charts.
- Alerts when the reading crosses a threshold, so you do not have to watch the chart.
- A bars limit you can adjust, so the chart stays fast on long histories.
How it works
The Efficiency Ratio (ER) was described by Perry Kaufman. It divides the net price change over a period by the sum of every single bar move over the same period. The result is close to 0 when price travels a lot but goes nowhere, and close to 1 when every bar moves in the same direction. You can smooth the reading with an Exponential Moving Average (EMA). A closed bar keeps its value. Only the bar that is still forming moves until it closes. With a higher timeframe selected, the ER is calculated on the candles of that timeframe and drawn as steps on your chart. The step of a closed higher timeframe candle is final, and the forming candle is provisional. Alerts fire once per closed bar.
How to use it
- Attach the indicator to any chart.
- Read the color: Green means an efficient move, Red means mostly noise, Gold means in between.
- Keep your trend entries for Green readings, or for a line that rises out of Red, and skip them while the line sits in Red.
- Optional: choose a higher timeframe to see its reading on the same chart.
- Turn on the alerts you want in the Alerts group, so you are told when the zone changes.
Key settings
| Setting | What it does | Default |
|---|---|---|
| ER period | Number of bars used to measure how straight the price move is | 10 |
| EMA smoothing | Smooths the reading, 1 keeps the raw value | 3 |
| Higher timeframe | Draws the reading of a larger timeframe, Current turns it off | Current |
| What to draw in subwindow | Line, histogram or both | Line + Histogram |
| Low threshold | Below this value the zone is Red, the market is in a range | 0.30 |
| High threshold | Above this value the zone is Green, the market is in a trend | 0.50 |
| Alerts | Popup, sound and push alerts on a zone cross, each one on or off | Off |
| Bars to compute | Limits the calculation to the most recent bars, minimum 50 | 500 |
Other settings control the applied price, line and histogram width, zone colors and the alert sound file.
Test it before you decide
No repaint is easy to check: let a bar close, then check that the value in the Data Window does not change. To test it: click Free Demo, then run it in the Strategy Tester in visual mode on your pair and timeframe.
Updates are free and included. Every release is listed in the What's new section of this page, so you always know what changed.
More from Fabii: Fabii Volatility ATR Percentile compares the current Average True Range (ATR) with its own history, so you know whether volatility is high or low for your market. Fabii Memory Baseline draws a baseline that forms flat steps, so you see where price has settled. Follow my profile to be notified when new ones are published.
Launch price is $30 and rises to $49 after the first 20 sales. Get it and have it on your charts in 2 minutes.
Comments and reviews
Questions? Post a comment on this page or message me and you get an answer within 24 hours.
If this saves you time, a short review that says which pair and timeframe you use helps other traders find it.
Past results do not predict future results. This indicator does not provide financial advice.
