The Choppiness Index (CHOP) is an indicator designed to determine if the market is choppy (trading sideways) or not choppy (trading within a trend in either direction). The Choppiness Index is an example of an indicator that is not directional at all. CHOP is not meant to predict future market direction, it is a metric to be used to for defining the market's trendiness only. A basic understanding of the indicator would be; higher values equal more choppiness, while lower values indicate directional trending.
The Choppiness Index was created by Australian commodity trader E.W. Dreiss.
100 * LOG10( SUM(ATR(1), n) / ( MaxHi(n) - MinLo(n) ) ) / LOG10(n) n = User defined period length. LOG10(n) = base-10 LOG of n ATR(1) = Average True Range (Period of 1) SUM(ATR(1), n) = Sum of the Average True Range over past n bars MaxHi(n) = The highest high over past n bars
The Choppiness Index is an interesting metric which can be useful in identifying ranges or trends. What analysts need to be wary of, is identifying when a range or trend is likely to continue and when it is likely to reverse. The best way to accomplish this would be by combining CHOP with additional charting tools and analysis. For example, using CHOP in conjunction with trend lines and traditional pattern recognition.
The time period to be used in calculating CHOP (14 is the Default).
Changing this number will move the CHOP either Forwards or Backwards relative to the current market. 0 is the default.
Can toggle the visibility of the CHOP as well as the visibility of a price line showing the actual current price of the CHOP. Can also select the CHOP Line's color, line thickness and visual style (Line is the Default).
Can toggle the visibility of the Upper Band as well as select its value, color, line thickness and line style.
Can toggle the visibility of the Lower Band as well as select its value, color, line thickness and line style.
Toggles the visibility of a Background color within the Bands. Can also change the Color itself as well as the opacity.
Sets the number of decimal places to be left on the indicator's value before rounding up. The higher this number, the more decimal points will be on the indicator's value.