The Kaufman Efficiency Ratio (KER) Indicator is a technical analysis tool that helps traders determine the efficiency of the market in generating profits. In this article, we will discuss the definition, working, and best settings of the Kaufman Efficiency Ratio Indicator, and how to use it to trade in MT5.
Definition
The Kaufman Efficiency Ratio Indicator is a technical analysis tool that measures the efficiency of the market in generating profits. The indicator was developed by Perry Kaufman and is based on the principle that markets are inefficient and that prices tend to move in a series of trends and corrections.
Working of Kaufman Efficiency Ratio Indicator in MT5
The Kaufman Efficiency Ratio Indicator works by measuring the ratio of the price movement to the total price movement over a certain period of time. The indicator uses a smoothed moving average to filter out market noise and generate more accurate signals.
The Kaufman Efficiency Ratio Indicator can be used to identify potential trend reversals and adjust trading strategies accordingly.
Best Settings for Kaufman Efficiency Ratio Indicator
The best settings for the Kaufman Efficiency Ratio Indicator depend on the trading strategy and the time frame being used. Generally, a shorter time frame, such as 5 minutes or 15 minutes, is used for intraday trading, while a longer time frame, such as 1 hour or 4 hours, is used for swing trading.
Traders can also adjust the sensitivity of the Kaufman Efficiency Ratio Indicator by changing the smoothing period used in the calculation. A shorter period will result in a more sensitive indicator, while a longer period will result in a smoother indicator.
Table of Best Settings for Kaufman Efficiency Ratio Indicator
The table below shows the best settings for the Kaufman Efficiency Ratio Indicator for different time frames:
| Time Frame | Smoothing Period | Color |
|---|---|---|
| Intraday | 5 | Blue |
| Swing | 10 | Green |
Traders can also customize the appearance of the Kaufman Efficiency Ratio Indicator by changing the color of the lines and other settings.
How to Trade with Kaufman Efficiency Ratio Indicator?
The Kaufman Efficiency Ratio Indicator can be used to identify potential trend reversals and adjust trading strategies accordingly. Here are two common ways to use the Kaufman Efficiency Ratio Indicator to trade in MT5:
Trade Trend Reversals
Traders can use the Kaufman Efficiency Ratio Indicator to identify potential trend reversals in the market. When the indicator value crosses above the 50 line, it generates a buy signal, indicating that the market may be entering an uptrend. When the indicator value crosses below the 50 line, it generates a sell signal, indicating that the market may be entering a downtrend.
Use as a Confirming Indicator
Traders can also use the Kaufman Efficiency Ratio Indicator as a confirming indicator to validate other technical analysis tools or trading signals. For example, if a trader receives a buy signal from another technical analysis tool, they can use the Kaufman Efficiency Ratio Indicator to confirm that the market is efficient in generating profits and that the buy signal is more likely to be successful.
Features of Kaufman Efficiency Ratio Indicator
The Kaufman Efficiency Ratio Indicator has several features that make it a useful tool for traders. Some of these features include:
- Measures the efficiency of the market in generating profits
- Can be used to identify potential trend reversals and adjust trading strategies accordingly
- Customizable settings to suit different trading strategies
Conclusion
The Kaufman Efficiency Ratio Indicator is a powerful tool that can help forex traders determine the efficiency of the market in generating profits, identify potential trend reversals, and adjust trading strategies accordingly. By incorporating the Kaufman Efficiency Ratio Indicator into their trading approach, traders can gain an edge in the markets and improve their chances of success.