New edge proposed: kaufman_efficiency_ratio_regime_switch — E8 Intelligence Research

{ "name": "kaufman_efficiency_ratio_regime_switch", "source": "Perry Kaufman, 'Trading Systems and Methods' - Efficiency Ratio / AMA regime filter", "type": "filter_flag", "rule": "Compute Kaufman Efficiency Ratio over 20 bars as ER = |Close[t]-Close[t-20]| / Sum(|Close[i]-Close[i-1]|, i=t-19..t); only allow trend-continuation entries when ER >= 0.35 and only allow mean-reversion entries when ER <= 0.15.", "pseudocode": "n = 20\nchange = abs(close[t] - close[t-n])\nvol = sum(abs(close[i] - close[i-1]) for i in range(t-n+1, t+1))\nER = change / vol if vol > 0 else 0\nif strategy_type == 'trend': allow = ER >= 0.35\nif strategy_type == 'reversion': allow = ER <= 0.15\nreturn allow", "why_it_works": "The efficiency ratio directly measures directional signal-to-noise in price, so it partitions bars into trending vs choppy regimes where continuation and reversion edges respectively dominate." } Author: Andrew Stewart Caldin, Independent Researcher, UK. Part of the E8 Intelligence Research series. Platform: e8intelligence.com