Efficiency Ratio With Regime Thresholds
Kaufman's Efficiency Ratio, published as the adaptation input to KAMA in "Smarter Trading" (1995), divides the net price change over N bars by the sum of every single-bar absolute move over the same span. A market that travels 200 pips net across 200 pips of total wiggle scores 100 - every bar contributed to the move in the same direction. A market that travels 20 net pips across 200 pips of total wiggle scores 10 - the same net change as a much smaller true move, buried in back-and-forth noise. A plain momentum reading cannot tell these two markets apart when their net change matches; the efficiency ratio is built specifically to. Reading a raw 0-100 ratio still asks the trader to remember where "chop" ends and "trend" begins, so this indicator classifies every bar against two threshold inputs and plots the line in a different colour band for each regime: silver at or below the chop threshold, orange in the transition zone between the two thresholds, and green at or above the trend threshold. The default thresholds (30 and 50) are a commonly cited starting calibration for Kaufman's ratio, not a universal constant - different symbols and timeframes have different typical efficiency, and the inputs exist so the bands can be recalibrated against a specific instrument's own history rather than trusted blindly out of the box. Notes and limitations - Needs InpErPeriod + 1 bars of history before it plots anything. - The two thresholds are a calibration choice, not a law of nature - the defaults are a reasonable starting point cited for Kaufman's ratio, but the right split genuinely differs by symbol and timeframe and should be checked against the instrument's own ER history before relying on the colour bands for decisions. - The ratio itself, like any efficiency/directional-move measure, can sit in the trend band during a strong move that later reverses hard - it measures how efficiently price has travelled, not which direction it will travel next.
Indicator · MT4 · v1.0 · Free
About Efficiency Ratio With Regime Thresholds
Efficiency Ratio With Regime Thresholds is an indicator for MetaTrader 4. It can alert you with a pop-up, sound, email or push message. It has 4 settings, such as Er period, Chop threshold and Trend threshold. MQL source code included.
Files in the download: EfficiencyRatioRegime.ex4, EfficiencyRatioRegime.mq4, EfficiencyRatioRegime.txt.
Settings
| Setting | Default | What it does |
|---|---|---|
| Er period | 10 | Bars the efficiency ratio is measured over (Kaufman's original default) |
| Chop threshold | 30.0 | ER at or below this is judged choppy/noise (0..100 scale) |
| Trend threshold | 50.0 | ER at or above this is judged trending (0..100 scale) |
| Alerts | true | Alert once per closed bar when the regime changes |
How to install
- Download the ZIP from your PolyMaria library and unzip it.
- In MetaTrader 4 open File → Open Data Folder, then go to MQL4 → Indicators.
- Copy the .mq4 file(s) there. Put any .mqh files in MQL4 → Include.
- Open the .mq4 file in MetaEditor and press Compile (F7) if MetaTrader does not show it.
- Drag the indicator from the Navigator onto a chart and adjust the settings.
Tags: Trend · Alerts · MT4 Indicator · MQL4 Source Code