Choppiness Index
Determines if the market is trending (low values) or ranging/choppy (high values).
Usage
Use to determine whether a market is trending or choppy before selecting a trading strategy. Values above 61.8 indicate chop; values below 38.2 indicate a strong trend.
Background
The Choppiness Index, developed by E.W. Dreiss, measures how much of the total ATR-based range is consumed by the actual net price move over N bars. A value near 100 means price wandered back and forth using all available range without net progress (maximum chop); near 0 means a straight directional move with minimal retracement. — StockCharts ChartSchool
Parameters
period(default: 14): Lookback period
Formula
\[
CHOP = 100 \times \frac{\log_{10}(\sum_{i=1}^n ATR(1)_i / (\max(H, n) - \min(L, n)))}{\log_{10}(n)}
\]