This paper presents a new wavelet-based scheme as a differential protection algorithm for power transformers. The eliminated method deals with enhanced discrete wavelet transform with detail and approximate coefficients and implement them to energy equations as a new wavelet based technique. The proposed scheme processing is applied to a various variety of transient conditions and successfully verified for transformer protection. Transformers are subjected to many abnormal events against normal operation condition such as magnetization inrush condition, external fault condition and interturn winding faults against turn to earth faults and turn to turn faults also. Simulation results are obtained and approved to sensitivity and reliability of the proposed scheme in transformer protection against all fault cases and also in fault identification and localization. However, the discussed approach also simulate fault under variety of conditions such as different fault resistances, different fault ratio and in case of external fault. The simulated system applies a CT saturation condition and also examines the selected approach against this fault type with different fault resistances against both 3-phase and single phase fault conditions. The simulation fault cases approve the sensitivity and accuracy of the selected scheme even the simplicity of the proposed scheme enhances the advantages and features toward transformer protection.