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Choppiness index is an indicator used to measure the degree in trendiness and in choppiness in a market.
It uses a 0-100 scale and includes an upper and a lower bands respectively corresponding to Fibonacci 61.80 and 38.20 numbers. While CI values below 31.80 mean a trending market, those above 61.80 correspond to a choppy one. Low CI readings can also mean that the end of a trend is near. On the other hand, high values can signify a near end of the consolidation period, and that a potential breakout can occur at any moment.
The Choppiness index function I have written takes the choppiness period (usually 14 bars) as argument and its formula uses the Logarithm, the True Range, the highest high and the lowest low functions. The final value is normalized by the decimal logarithm of the Choppiness index period.
Trading financial instruments, including foreign exchange on margin, carries a high level of risk and is not suitable for all investors. The high degree of leverage can work against you as well as for you. Before deciding to invest in financial instruments or foreign exchange you should carefully consider your investment objectives, level of experience, and risk appetite. The possibility exists that you could sustain a loss of some or all of your initial investment and therefore you should not invest money that you cannot afford to lose. You should be aware of all the risks associated with trading and seek advice from an independent financial advisor if you have any doubts.