Polarized Fractal Efficiency

Written by Miroslav Marinov

Miroslav Marinov

Miroslav Marinov, a financial news editor at TradingPedia, is engaged with observing and reporting on the tendencies in the Foreign Exchange Market, as currently his focus is set on the major currencies of eight developed nations worldwide.

, | Updated: September 15, 2025

Developed by Hans Hannula, the Polarized Fractal Efficiency (PFE) indicator was described in the January 1994 issue of Technical Analysis of Stocks & Commodities magazine. The PFE generally indicates how trending or overextended a market is. If the PFE reading is below zero, this suggests a bear trend, while a reading above zero suggests a bull trend. The higher the value, the more efficient – or ‘trendier’ – the movement to the upside. A reading close to zero indicates that price action is choppy and less efficient.

Traders usually enter at maximum efficiency – that is, when the PFE appears to have reached an extreme in either direction – and keep their positions open until the indicator reaches the opposite extreme. An exception arises when the PFE slows near the zero line; in that case, the trader should exit the trade and wait for a new entry at the next ‘maximum efficiency’ level.

Chart Source: VT Trader