Kaufman Efficiency Ratio CFD Technical Analysis and Kaufman Efficiency Ratio CFD Signals

Developed by Perry Kaufman. Described in his book entitled "New Systems and Methods".

The Kaufman Efficiency measures the ratio of the relative market speed in relation to the volatility. Kaufman efficiency is often used by CFD traders as a filter to help avoid trading when the cfd market is "choppy" or flat ranging markets. The indicator also helps to identify smoother CFD Trading market trends. This is an oscillator indicator that oscillates between +100 & -100, where zero is the center point. +100 is upward trending market & -100 is downward trending markets.

Kaufman Efficiency Ratio

Efficiency technical indicator is calculated by dividing net change in the cfds price movement over an n number of periods by sum of all the bar-to-bar cfds price changes taken as a absolute values over these same n-periods.

CFDs Technical Analysis and Generating CFDs Signals

The Kaufman is used to generate cfd signals as follows:

The smoother the manner in which the cfd market is trending then the greater the Efficiency Ratio shown by the indicator. Efficiency Ratio value readings of around zero indicate a lot of inefficiency or "choppiness" in the cfd market cfd trend movements (ranging cfd markets).

• If the Efficiency Ratio shows a reading of +100 for a cfd instrument, then that cfd is trending upwards with perfect efficiency.
• If the Efficiency Ratio shows a reading of -100 for a cfd instrument, then that cfds price is trending downwards with perfect efficiency.

However, it is almost impossible for a market cfd trend to have a perfect efficiency ratio since any retracement movement against the current cfd trend direction during the time period being used to calculate the indicator would decrease the efficiency ratio.

Bullish/Buy CFD Signal

Efficiency Ratio values above +30 indicate a smoother upward cfds trend.

Buy trading signal is generated above center-line mark.

Buy CFDs Signal

Bearish/Sell CFD Signal

Efficiency Ratio values below -30 indicate a smoother downward cfds trend.

Sell CFD Signal is generated below zero center-line mark.

Sell CFDs Signal

However, it is good you experiment with other values to determine the most appropriate levels for the cfd instrument being traded and the value that is the best for your cfd trading technique that you are using.