What it is
The Choppiness Index (often shortened to CHOP) was created by Australian trader E.W. Dreiss. It compares how much ground price covered candle by candle with how far it actually got. If price moved a lot but ended up roughly where it started, the market is choppy.
It sits in its own pane and is a filter, not a signal. Its job is to keep you out of trend trades when the market is going nowhere, and to tell you when a breakout has a cleaner trend behind it.
How it is calculated
1. For each of the last 14 candles, take the true range (the candle's full size including any gap from the previous close). 2. Add those 14 true ranges together. 3. Find the highest high and lowest low of the same 14 candles, and the distance between them. 4. Divide the sum of true ranges by that distance. 5. Take the base 10 logarithm of the result, divide by the logarithm of 14, and multiply by 100. A straight line move gives a low number; lots of back and forth inside a small box gives a high one.
Settings
| Setting | Default | Range | What it changes |
|---|---|---|---|
| length | 14 | 2 to 200 | How many candles it looks back. Longer gives a slower, steadier reading of the market's character. |
How to read it
How to trade it
- 1
Use it as a gate: only take trend or breakout trades when CHOP is below 61.8, and ideally falling.
- 2
Entry trigger: CHOP drops from above 61.8 towards 50 while price closes outside a recent range. On gold 1 hour, a close above the range high is the long trigger.
- 3
Stop: on the other side of the range price has just left, for example 10 to 15 points below the range on gold 1 hour.
- 4
Target: 2 times the stop, or hold while CHOP stays under 50 and exit when it climbs back above 61.8.
- 5
When CHOP is above 61.8, switch to range tactics or stand aside.
The trend idea is cancelled if CHOP climbs back above 61.8 and price closes back inside the old range.
WickSpeak draws it on the chart and writes a plain-English reading on the live candle: what it is, what it is doing now, how to trade it and what would prove it wrong. Playbook can test it as a condition in a play: crosses above a number, crosses below a number, is above or below a number, is between two numbers, is rising and is falling. That makes it easy to add "CHOP is below 61.8" as a filter to any play.
Best markets and timeframes
Useful on any market. On gold and US30 it is most helpful on 15 minute to 4 hour charts, where it separates the quiet Asian hours from directional London and New York moves.
Common mistakes
- Reading a low value as bullish. It says trending, not which way.
- Using it as an entry signal on its own with no trigger from price.
- Treating 61.8 and 38.2 as exact walls; they are guides, not lines that price must respect.
Works well with
Questions traders ask
What does the Choppiness Index measure?
It measures how much a market is trending versus moving sideways, from 0 to 100. Values above 61.8 point to a choppy, sideways market and values below 38.2 to a strong trend. It never tells you the direction.
What is the best setting for the Choppiness Index?
14 is the standard and works on most timeframes. Some traders use 20 or 28 for a slower filter on higher timeframes.
Why are 61.8 and 38.2 used?
They come from Fibonacci ratios and are the conventional thresholds for choppy and trending. They are rules of thumb, so some traders use 60 and 40 instead.
Is the Choppiness Index the same as ADX?
No, but they answer a similar question. ADX rises as a trend strengthens; CHOP falls as a trend strengthens. Many traders use one or the other as a trend filter.