Transformers are the most prominent elements of power systems. In some cases, it may be desired to monitor their equivalent circuit parameters in order to establish the electrical models of them or to determine some of the potential failures in advance. In this work, a novel method that provides online monitoring of equivalent circuit parameters of transformer is presented. This method is based on differential equation algorithm (DEA) that uses a small number of voltage and current samples. The effectiveness of proposed method is shown by computer simulations.