FTB-C000331 / Formula component

Directional Change

Directional Change is the absolute difference between the current input and the lookback-start input.

Also known asnet lookback change

Foundation Formula defined 1 linked topicPublished

Definitions

In plain terms

It forms the numerator of Kaufman's efficiency ratio.

Technical

The endpoints, input adjustment basis, valid-observation counting, and missing-value policy must match the path-length denominator.

Scope

It ignores the route taken between the two endpoints.

Formula

Directional change = abs(x_t - x_(t-n))
LaTeX: DC_t=|x_t-x_{t-n}|
SymbolMeaningUnit
x_tcurrent inputinput unit
x_(t-n)lookback-start inputinput unit

Output unit: input unit

Examples

  • A governed lesson uses Directional Change only with declared inputs, timing, parameters, and edge-case behavior.

Common misconceptions

  • It ignores the route taken between the two endpoints.

Concept relationships

Related

Required by

Where this concept is used

Evidence and governance

  1. 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
published
Written by

Fintech engineer building market-data and financial systems, and the author of every article, glossary record, and reference implementation on The Fintech Builder.