📊 TECHNICAL
Choppiness Index
A bounded 0-100 oscillator that measures whether the market is trending or moving sideways, without indicating direction, helping traders choose trend versus range strategies.
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Live Demo — Choppiness Index applied to NIFTY 50 (illustrative)
PriceEMA(9)EMA(21)SMA(20)
What is Choppiness Index?
Developed by E.W. Dreiss, this index answers a single question: is the market trending or chopping sideways? It compares the sum of true range movement to the net range traveled over a lookback period.
Formula
Choppiness Index = 100 x LOG10( SUM(ATR(1),N) / (MaxHigh(N)-MinLow(N)) ) / LOG10(N)Parameters
| Parameter | Default | Description |
|---|---|---|
| Period (N) | 14 | Lookback window for the true-range sum and high/low range |
| Upper Threshold | 61.8 | Level above which the market is considered choppy |
| Lower Threshold | 38.2 | Level below which the market is considered trending |
Signal Interpretation
- Readings near 100 mean a lot of bar-to-bar movement but little net distance — choppy conditions.
- Readings near 0 mean price covered a large net distance efficiently — a strong trend.
- Sustained time above 61.8 favors range/mean-reversion strategies.
- A drop below 38.2 often marks a fresh trending phase.
- Crossings of the Fibonacci-style thresholds are treated as regime-change alerts.
Tips & Best Practices
- Use as a regime filter to decide which strategy family to deploy.
- Pair with a directional indicator (ADX) since Choppiness carries no directional info.
- A 14-period setting is standard; shorter periods increase sensitivity for intraday shifts.