Choppiness Index
Measures whether a market is trending (low values near 38.2) or range-bound / choppy (high values near 61.8) using ATR and the highest-high/lowest-low range.
Formula
CHOP = 100 × log₁₀(Σ ATR(1, n) / (Highest High_n − Lowest Low_n)) / log₁₀(n)
The Choppiness Index divides the sum of n daily ATRs by the high-low range over n periods and normalises on a logarithmic scale. The result falls between 0 and 100; a fractal dimension constant of 61.8 and 38.2 mark the key thresholds.
- Above 61.8 → choppy, sideways market — trend-following signals are likely to fail
- Below 38.2 → strongly trending — trend-following strategies perform well
Unlike ADX, the Choppiness Index gives no directional information. Its value is as a regime filter: apply trend systems only when CHOP is low; switch to mean-reversion tactics when it is high.
Related Terms
Average Directional Index (ADX)
Non-directional trend-strength gauge (0–100); readings above 25 indicate a trending market, below 20 suggest a range.
IntermediateAverage True Range (ATR)
Volatility measure averaging the greatest of: current high–low, current high–prior close, or current low–prior close over n periods (default 14).
IntermediateBollinger Bandwidth
Measures the percentage width of Bollinger Bands relative to the middle band; extreme lows signal a volatility squeeze preceding a large move.
IntermediateDonchian Channel
Breakout envelope plotting the highest high and lowest low over the past n periods (typically 20); the midline is their average.
IntermediateStandard Deviation
Statistical measure of price dispersion around a mean; rising values indicate increasing volatility, falling values a tightening range.
Intermediate