Internal turn-to-turn short circuits are the most difficult types of faults to detect within the transformers. This paper proposes a new, simple and efficient algorithm in order to protect transformers against these faults. Using this protection algorithm which is based on negative sequence analysis, make it possible to detect and also locate low level inter-turn short circuits which typically cannot be detected by the traditional differential algorithm before they extended into more severe faults. Furthermore, the proposed algorithm is stable in the case of external faults as well as load imbalance condition. In this work, first, a typical transformer is modeled based on Finite Element Method to simulate the transformer behavior under different operation conditions. Then, the accuracy and performance of new protection technique in detection and localization of inter-turn faults is studied by applying it to the simulated transformer