Lopez Efficiency
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FREE LOPEZ EFFICIENCY INDICATOR FOR METATRADER

Measure market efficiency – know when to trend or stay flat

Identify whether the market is trending, ranging, or stalling with a simple but powerful tool that calculates price movement efficiency over time. The Lopez Efficiency Indicator helps you adapt your strategy to the current market structure—whether you're a trend trader or prefer to trade ranges.

  • Evaluates market directionality with a clean visual ratio
  • Highlights trend vs range conditions with intuitive color coding
  • Helps you avoid false breakouts and unproductive setups
  • Easy to read and apply across all timeframes
  • Great for timing entry modes (scalping, swing, positional)
  FAQ

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Description

The PZ Lopez Efficiency Indicator is designed to measure the efficiency of price movement over a given number of bars. It calculates how many typical true ranges the market has moved compared to its total directional movement. This ratio reveals whether price action is directional or choppy.

Here’s what the values typically mean:

  • Below 1 – Market is inefficient and likely consolidating
  • Around 1–2 – Price action is beginning to show direction
  • Above 2 – Market is efficiently moving in one direction (good for trend trading)
  • Above 3 – Market may be overextended and due to pause or retrace

The indicator uses simple color codes for clarity:

  • Red – Suggests range or sideways movement (look for positional setups)
  • Orange – Indicates choppy or early trend conditions (range trading favorable)
  • Blue – Implies efficient price action (trend trading favorable)

It works across all instruments and timeframes and is particularly useful for traders who want to time when to engage with trend-based strategies and when to wait or switch to range setups.

Input Parameters

  • Period – Number of bars to evaluate the true range and directional movement (default: 14)

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Frequently Asked Questions

It’s the ratio between how far the market has moved (from bar A to bar B) and the total volatility during that period, based on the average true high-low range. A higher ratio means the market is moving with purpose; a lower ratio indicates noise or consolidation.

Red means the market is quiet or inefficient—ideal for range setups. Orange suggests caution, with a transition between range and trend conditions. Blue indicates strong, directional price action—ideal for trend-following trades.

Use it as a strategy filter. If the ratio is low (under 1), you may want to avoid breakout trades and stick to mean-reversion. When it’s over 2, trend strategies are more appropriate. Avoid trend trades when the ratio is above 3, as price may soon consolidate or reverse.

No. The indicator uses closed bar data and does not repaint. It evaluates a fixed number of historical bars for its calculation, making it reliable for real-time and backtested analysis.

It works on Forex, commodities, indices, stocks, and crypto—any instrument available in your MetaTrader terminal.

Yes. You can use shorter periods (like 10–14 bars) for scalping or intraday, and longer periods (20–50 bars) for swing or positional trading. The interpretation remains consistent across timeframes.