Definitions
In plain terms
It approaches one for a direct path and zero when net movement is small relative to back-and-forth movement.
Technical
The implementation freezes lookback endpoints, valid observations, zero-path policy, timestamps, and adjustment basis.
Scope
It measures path efficiency, not market efficiency or future profitability.
Formula
ER_t = abs(x_t - x_(t-n)) / sum(abs(x_i - x_(i-1)))ER_t=\frac{|x_t-x_{t-n}|}{\sum_{i=t-n+1}^{t}|x_i-x_{i-1}|}| Symbol | Meaning | Unit |
|---|---|---|
x | ordered input series | input unit |
n | efficiency lookback | observations |
Output unit: ratio
Examples
- A governed lesson uses Efficiency Ratio only with declared inputs, timing, parameters, and edge-case behavior.
Common misconceptions
- It measures path efficiency, not market efficiency or future profitability.
Concept relationships
Prerequisites
Required by
Where this concept is used
Evidence and governance
- Kaufman Adaptive Moving Average TA-Lib · first party technical publication
Supports: preferred label, short definition, technical definition, formula
Limits: Implementation seeding, readiness, and parameter defaults must be frozen for reproducible parity.
- Reviewed by
- fintech-builder-batch-006
- Last reviewed
- 2026-07-27
- Next review
- 2027-07-27
- Record status
- evidence reviewed
This record is evidence-reviewed and readable, but not yet promoted to published — it is served noindex,follow and excluded from the sitemap.