Overview
The efficiency ratio is a calculated as the change of price over a period divided by the volatility of that period. The volatility is defined in such a way that the efficiency ratio is bounded above by 1 and below by -1.
An ER close to 1 is a strong upward trend. An ER close to -1 is a strong downward trend, and an ER near 0 is a market that is trading sideways.
Efficiency Ratio
{% ER = Change/Vol %}
{% Change = Abs(Close - Begining Close) %}
The change is the value of the close, minus the value of the close n periods ago, where n is the time frame
of the KAMA.
{% Vol = \sum_1^n Abs(Close_{i+1} - Close_i) %}
Volatility is equal to the sum of the absolute value of the changes in the close over the last n number of periods.