The access of large‐scale renewable energy and power electronic equipment to the power grid makes the power source and short‐circuit paths possess time‐varying characteristics when faults occur, which has a serious impact on the traditional protection based on power frequency components. Besides, higher requirements are needed for relay protection in the power grid. The transient fault current contains a large amount of fault information. First, the bus capacitance has a strong reflection effect on the high frequency signal, and there are obvious differences in the high frequency component of the fault current of internal and external faults. Next, a transient quantity algorithm based on sequential overlapping derivative transform is introduced. The algorithm can effectively suppress the low frequency component and enhance the high frequency component in the current, which simply and effectively highlights the difference between the transient current of internal and external faults. Finally, through the ratio of high frequency energy of each outgoing line, the fault direction can be accurately determined, and the transient directional pilot protection can be formed. The accuracy of the protection scheme is verified by a large number of simulation experiments.