OPEN-SOURCE SCRIPT
Updated Efficiency Divergence Oscillator
Efficiency Divergence Oscillator
## Overview
The Efficiency Divergence Oscillator turns the **signed efficiency ratio** - net price displacement divided by the total path price actually travelled - into a standardized, bounded oscillator, and then looks for **divergence between price and the efficiency of its travel**. The idea it tests: when price makes a new extreme but reaches it on an increasingly choppy, inefficient path, the move is losing conviction.
It is a single-pane oscillator. It needs no external data and no volume. Every data input is user-configurable, so it runs on any symbol, asset class or timeframe, in any market and on any timeframe. Defaults target NSE NIFTY index futures on intraday charts.
## What it plots
- A z-scored **efficiency oscillator** (clean advance = up, clean decline = down, choppy travel = near zero), with a glow line and sigma-based overbought/oversold levels.
- **Extreme-zone bands** (default +/-3 sigma) with a gradient fill that deepens toward the edge.
- **Divergence lines and labels** on the oscillator - regular (reversal) and hidden (continuation), in two colors.
- **In-band reversal dots** where the oscillator turns inside an extreme zone.
- Optional **price-pane marks** at the confirmation bar (all generated by this one indicator).
- A **background-adaptive status dashboard** (oscillator value in sigma, zone, last divergence, last reversal, signed efficiency in %).
## Why these components are combined (mashup rationale)
This script combines a **derived measure**, a **normalization stage**, a **divergence engine** and a **reversal read**, because each answers a question the others cannot and none is useful here alone:
1. **Signed efficiency ratio (path quality).** Momentum tells you how FAR price moved; it does not tell you how DIRECTLY it got there. The signed efficiency ratio = (price - price[len]) / sum(|price - price[1]|, len), a value in +/-1 that is positive for efficient up-moves and negative for efficient down-moves. It isolates path quality - a dimension a magnitude-only momentum oscillator cannot show.
2. **Standardization (rolling z-score).** efficiency differs in scale across instruments. The z-score expresses it in standard-deviation units, so "overbought/oversold" and the extreme bands mean the same thing on NIFTY, on a commodity future, or on a crypto instrument. Without this step the divergence thresholds would not transfer between symbols.
3. **Divergence engine.** The original payload is reading **price-versus-efficiency disagreement at confirmed pivots**. The engine pairs each new price pivot with the oscillator value, then requires: a genuine new price extreme; the measure failing to confirm it; a minimum oscillator gap scaled to the oscillator own stdev; the two pivots within a maximum bar distance; and optionally an overbought/oversold reading at the pivot. These gates make the combination produce signal rather than noise.
4. **Reversal read.** Independently, the engine flags oscillator turns that occur inside the extreme bands - a complementary exhaustion cue.
Together the components form one pipeline: **build the signal -> make it comparable (z-score) -> surface where price and that signal disagree (divergence) and where it exhausts (reversal).** Each is incomplete alone.
## How it works (method)
efficiency = (price - price[len]) / sum(abs(price - price[1]), len) over the efficiency window, a value in +/-1; this is standardized with a rolling z-score to the oscillator.
Regular and hidden divergence are detected from confirmed pivothigh/pivotlow pivots and filtered by the gates above; reversals are oscillator pivots that print inside the extreme bands. Pivots confirm a few bars after they occur, so a printed signal does not repaint. The confirmation lag equals the pivot length.
## How to use it
1. Add the indicator on any chart; no special data is required.
2. Read divergence as **context, not a trigger**: a bearish divergence (price higher high, efficiency lower high) says the advance is getting choppier; a bullish divergence says the decline is. Confirm with your own structure, levels and risk process.
3. Tune the **pivot length**, **max gap** and **min oscillator gap** to your timeframe; raise them for fewer, cleaner signals.
## Originality
This is an original implementation - not a efficiency line and not a generic divergence script, but the specific combination of efficiency, sigma-standardization that makes the read portable across markets, a multi-gate divergence engine (magnitude + distance + extreme-zone), hidden-divergence and in-band reversal detection, and a background-adaptive dashboard. The code is written from scratch; helper functions use only their arguments and built-ins.
## Credits
The Efficiency Ratio was introduced by **Perry J. Kaufman**. **Price/oscillator divergence** is a long-established, publicly documented technical-analysis technique. This script is not affiliated with, nor endorsed by, any third party.
## Notes / limitations
- Efficiency is a path-quality read, not a direction call; in strong clean trends it stays elevated without diverging.
- Divergence is descriptive context, never a guarantee of reversal.
- Confirmation lags each pivot by the pivot length.
## Disclaimer
Research and educational tool only. NOT financial advice and no guarantee of profitability or accuracy. Indicators describe past behaviour; they do not predict the future. Trading carries risk of loss. Test out-of-sample and make your own decisions. The author accepts no liability for any use of this script.
## Overview
The Efficiency Divergence Oscillator turns the **signed efficiency ratio** - net price displacement divided by the total path price actually travelled - into a standardized, bounded oscillator, and then looks for **divergence between price and the efficiency of its travel**. The idea it tests: when price makes a new extreme but reaches it on an increasingly choppy, inefficient path, the move is losing conviction.
It is a single-pane oscillator. It needs no external data and no volume. Every data input is user-configurable, so it runs on any symbol, asset class or timeframe, in any market and on any timeframe. Defaults target NSE NIFTY index futures on intraday charts.
## What it plots
- A z-scored **efficiency oscillator** (clean advance = up, clean decline = down, choppy travel = near zero), with a glow line and sigma-based overbought/oversold levels.
- **Extreme-zone bands** (default +/-3 sigma) with a gradient fill that deepens toward the edge.
- **Divergence lines and labels** on the oscillator - regular (reversal) and hidden (continuation), in two colors.
- **In-band reversal dots** where the oscillator turns inside an extreme zone.
- Optional **price-pane marks** at the confirmation bar (all generated by this one indicator).
- A **background-adaptive status dashboard** (oscillator value in sigma, zone, last divergence, last reversal, signed efficiency in %).
## Why these components are combined (mashup rationale)
This script combines a **derived measure**, a **normalization stage**, a **divergence engine** and a **reversal read**, because each answers a question the others cannot and none is useful here alone:
1. **Signed efficiency ratio (path quality).** Momentum tells you how FAR price moved; it does not tell you how DIRECTLY it got there. The signed efficiency ratio = (price - price[len]) / sum(|price - price[1]|, len), a value in +/-1 that is positive for efficient up-moves and negative for efficient down-moves. It isolates path quality - a dimension a magnitude-only momentum oscillator cannot show.
2. **Standardization (rolling z-score).** efficiency differs in scale across instruments. The z-score expresses it in standard-deviation units, so "overbought/oversold" and the extreme bands mean the same thing on NIFTY, on a commodity future, or on a crypto instrument. Without this step the divergence thresholds would not transfer between symbols.
3. **Divergence engine.** The original payload is reading **price-versus-efficiency disagreement at confirmed pivots**. The engine pairs each new price pivot with the oscillator value, then requires: a genuine new price extreme; the measure failing to confirm it; a minimum oscillator gap scaled to the oscillator own stdev; the two pivots within a maximum bar distance; and optionally an overbought/oversold reading at the pivot. These gates make the combination produce signal rather than noise.
4. **Reversal read.** Independently, the engine flags oscillator turns that occur inside the extreme bands - a complementary exhaustion cue.
Together the components form one pipeline: **build the signal -> make it comparable (z-score) -> surface where price and that signal disagree (divergence) and where it exhausts (reversal).** Each is incomplete alone.
## How it works (method)
efficiency = (price - price[len]) / sum(abs(price - price[1]), len) over the efficiency window, a value in +/-1; this is standardized with a rolling z-score to the oscillator.
Regular and hidden divergence are detected from confirmed pivothigh/pivotlow pivots and filtered by the gates above; reversals are oscillator pivots that print inside the extreme bands. Pivots confirm a few bars after they occur, so a printed signal does not repaint. The confirmation lag equals the pivot length.
## How to use it
1. Add the indicator on any chart; no special data is required.
2. Read divergence as **context, not a trigger**: a bearish divergence (price higher high, efficiency lower high) says the advance is getting choppier; a bullish divergence says the decline is. Confirm with your own structure, levels and risk process.
3. Tune the **pivot length**, **max gap** and **min oscillator gap** to your timeframe; raise them for fewer, cleaner signals.
## Originality
This is an original implementation - not a efficiency line and not a generic divergence script, but the specific combination of efficiency, sigma-standardization that makes the read portable across markets, a multi-gate divergence engine (magnitude + distance + extreme-zone), hidden-divergence and in-band reversal detection, and a background-adaptive dashboard. The code is written from scratch; helper functions use only their arguments and built-ins.
## Credits
The Efficiency Ratio was introduced by **Perry J. Kaufman**. **Price/oscillator divergence** is a long-established, publicly documented technical-analysis technique. This script is not affiliated with, nor endorsed by, any third party.
## Notes / limitations
- Efficiency is a path-quality read, not a direction call; in strong clean trends it stays elevated without diverging.
- Divergence is descriptive context, never a guarantee of reversal.
- Confirmation lags each pivot by the pivot length.
## Disclaimer
Research and educational tool only. NOT financial advice and no guarantee of profitability or accuracy. Indicators describe past behaviour; they do not predict the future. Trading carries risk of loss. Test out-of-sample and make your own decisions. The author accepts no liability for any use of this script.
Release Notes
Efficiency Divergence Oscillator — update notesForward calibration added. Each divergence and reversal class (Reg Bull/Bear, Hidden Bull/Bear, Rev +/−) is resolved by a triple-barrier outcome, uniqueness-weighted and recency-decayed, and reported as an edge over a zone-matched base rate with a Wilson interval and a multiple-testing-corrected significance star — so you can see which efficiency (path-quality) divergences actually pay on your instrument.
Identity strip showing name · symbol · timeframe on the chart (theme-adaptive).
Exports bus: EXP_Osc, EXP_OscZ, EXP_Zone, EXP_Bias, EXP_RegDiv, EXP_HidDiv, EXP_Reversal, EXP_BullEdge, EXP_BearEdge, plus EXP_Efficiency.
Pro dashboard adds the per-class calibration table; settings reorganized into 7 groups; all toggles default-on; NIFTY/intraday defaults retained; efficiency-ratio credit (Kaufman) kept in the header, out of the UI.
Educational only — not financial advice. Efficiency is a path-quality read, not a direction call; calibration is in-sample, forward-measured. Validate out-of-sample.
Open-source script
In true TradingView spirit, the creator of this script has made it open-source, so that traders can review and verify its functionality. Kudos to the author! While you can use it for free, remember that republishing the code is subject to our House Rules.
Disclaimer
The information and publications are not meant to be, and do not constitute, financial, investment, trading, or other types of advice or recommendations supplied or endorsed by TradingView. Read more in the Terms of Use.
Open-source script
In true TradingView spirit, the creator of this script has made it open-source, so that traders can review and verify its functionality. Kudos to the author! While you can use it for free, remember that republishing the code is subject to our House Rules.
Disclaimer
The information and publications are not meant to be, and do not constitute, financial, investment, trading, or other types of advice or recommendations supplied or endorsed by TradingView. Read more in the Terms of Use.