Choppiness Index Indicator

Choppiness Index Indicator

Choppiness Index is a forex technical indicator which helps user to determines the momentum and trend of the market. So, basically, this indicator consist of two indicator that located below the main chart with separated window, produces oversold and overbought signals when the signal line (yellow) move touch over predefined level limit, either rising or falling.

But these signals are not strongth enough to be a refference to make decision when entry in the market, in this case an other confirmation signal is needed. Therefore Choppiness index indicator works best when it is combined with moving averages indicator. Because this indicator itself doesn’t give clear signals so Moving average indicator is necessary. Especially for newbie trader can be confusing when using this indicator at most of the time. But basically this indicator work way is do following the trend so it will work best when market condition is trending.

The Choppiness index basically consists  of two indicators are channels and oscillators that move like the MACD signal line falling and rising. The upper band of this indicator functions as overbought level and the lower band functions as oversold zone. Therefore, when the yellow oscillator is around the lower band, most probably the selling trend will be end and you must focus to look for a buying signal opportunity and when the yellow oscillator is around the top band, you should focus to look for short opportunities.

Buy:

Choppiness Index Indicator Buy condition

• The market must rise in trend.
• The market must bounce from the latest support.
• The yellow oscillator indicator of the Choppiness index must rise from the lower band.
• Place your long position when the above conditions are met.
• Place your stop loss under the latest support.
• Take your advantage when the yellow oscillator penetrates below the lower band.

Sell:

Choppiness Index Indicator Sell condition

• The market must go down the trend.
• The market must fall from the latest resistance.
• The yellow oscillator indicator of the Choppiness index must fall from the upper band.
• Place your short position when the above conditions are met.
• Place your stop loss above the recent high swing.
• Take your advantage when the yellow oscillator penetrates below the lower band.

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