Choppiness Index — The Measure of Indecision of The Market

Have you heard the term choppy market yet? Choppy market can be considered a trendless market state. Sideway is a more straightforward way of saying this. 80% of the time on the market is choppy. In fact you can also see, there is a tendency to once, the rest is mainly the price is very boring tedious. This boring move is quite risky. The first risk is that you absolutely do not know where the price will actually go after, because it goes evenly, increasing uncertainty is not finished. Secondly, if you’ve got a command and are choppy, you’ll be trapped in this area, and of course, your predictions no longer match the situation.

In general, choppy is not fun at all. Therefore, some trading strategies have rules not to participate in the market at times like this. They often use a number of indicators to filter the market as the average (these lines are constantly crossing the choppy sign) or the Bollinger Bands shrink. Of course, defining a choppy market is not the primary task of these traditional indicators. We should assign that to an “expert”. In this article, that expert will appear.

Chopping Index

The Choppiness Index is represented as a line graph in the sub window on the chart. You may not understand how this indicator works if you first look at it. But do not worry, a little more, I will have detailed instructions how to use.

Establishing the Chopin Index

Establishing this indicator is not difficult either. The first is also the most important is period, with a default value of 14, which you can use with this parameter. After a period of use, you can adjust to suit the trading strategy. There are two thresholds, the default is 61.8 and 38.2. The rest is the aesthetic card, fine for the eyes.

Guide to the use and evaluation of the Chopin Index

If you use the default parameter of the indicator, 2 levels 61.8 and 38.2 are two very important parameters. Whenever the price is approaching or higher than 61.8, it is the choppy market. Conversely, below 38.2 means that the market is trending. You can review the illustration at the beginning of this article and you will see the effectiveness of the indicator in finding out how the market is choppy.

Choppiness Index is an indicator … strange. As in the past, we often focused on trend indicators that ignored the market’s choppy conditions. With the choppy signals received from the indicator, we have a number of ways to deal with this type of condition, firstly … withdrawal from the market. The second is to breakout. And there are other ways to capitalize on the potential of the Chopin Index.

In my opinion, this is one of the best indicators to evaluate the market. And do not forget that choppy counts for 80% of the broadcast time.

Happy Trading