How to Trade Choppiness Index (CHOP)

Learn how to trade with the Choppiness Index (Chop). One of the most important things to note about the choppiness index is that it is not a directional indicator. In other words the Choppiness Index will not show you the directional movement of any trend. The Choppiness index is supposed to calculate whether or not an option is in a trend or moving sideways. It does this by calculating a logistic function along with the average true range of an “n” period back with the default of 14. The Choppiness index can be used with a variety of other indicators to confirm a trend, or overbought and oversold levels on momentum indicators. Anything above the upper band is considered more choppy, while anything below the lower band is consider more in a trend movement. The maximum movement is that of an oscillator and is in between 0-100.