Trade Stock Indices

Choppiness Technical Analysis & Choppiness Signals

Built and made by E.W. Dreiss

The Choppiness Index was made to be a simple way to help traders see if stock prices are trending or staying within a certain range.

This indicator works a lot like ADX. Both are built to measure the strength or momentum of a trend and help you figure out if the market's trending or just moving sideways.

Choppiness Indicator - Choppiness Indicator Analysis on Charts

The Choppiness Index indicator ranges between 0 and 100: it commonly incorporates upper and lower bands set at the 61.8 and 38.2 levels, respectively.

A trader would enter a buy transaction once the reading on the stochastic oscillator exits the oversold region and commences an ascent.

Secondly, it computes the maximum attained value and the minimum value across 'n' defined periods and determines the differential between them.

0.33, it divides the sum of the actual levels & calculates the bottom-10 logarithm of this value.

Finally, this value is divided by the base-10 logarithm of the specified period and multiplied by 100.

Technical Analysis and How to Generate Trading Signals

The Choppiness Index does not show direction, meaning it does not say which way the stock market is heading.

Its basic principle is that the more heavily the stock trading market is trending over the last number of n-periods the closer to zero the Choppiness Index will be and the more heavily the stock trading market is consolidating that is moving sideways in a ranging or chopping manner, over the last n periods the closer to 100 the Choppiness Index will be.

Indicator results over 61.8 show that the stock market is going sideways (moving without a clear direction).

High values show after strong consolidation. They signal a possible breakout once buildup ends.

Choppiness Index values of below 38.2 indicate that the stock market is trending.

Lower numbers occur during/after a very strong trending time. Lower numbers might also be looked at & understood as a sign of a possible coming period of staying in place and jumps after a strong trend time has taken place.

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