Hi all. I'm sure you looked at the image above. Undoubtedly you instantly made a very clear differentiation between the left side and the right side. On the left that the market is falling like a stone on the right that the price is jumping all over the region: choppy.
There have been several attempts here in FF and at other places to build a choppiness index indior. I discovered no successful results. I wonder if someone has great ideas about constructing an algorithm that is able to measure how large the market is. The inspiration for not simply using my naked eyes would be that I'd like to display all the major currencies (28 pairs) on 3 TF. That is 84 charts to track 24x5.
Choppiness is usually measured with the ADX indior. The ADX is designed to assess the strenght of the trend. The image below shows that a trend can also be choppy. The trendiness and the choppiness are clearly two independent things. ADX is hence not in any way that an indior of the choppiness of the market. Each of the indiors or formula I could detect make the mistake of considering choppy = ranging.
Some people suggested the use of range pubs or renko pubs to take out the choppiness altogether. No choppiness = no demand for an indi. Brilliant idea but look at the range chart below: continuous range bar charts, at any given range, can also be choppy!
The longer the market is volatile the longer it's choppy. The volatility is measured by ATR. Too bad we just found that range bar chart can also be choppy yet the ATR is continuous on them. Conclusion: ATR is not any good either.
I tried to scroll down a chart bar by bar to see what I would consider a choppy market. I takes me 3-5 pubs to notice a change between choppy/non-choppy. Sometimes I just couldn't decide! So I can't expect a crisp YES/NO indior a degree of choppiness. I can also expect up to five bars of lag (! ) ) .
Drawing a line in the finish of the pub to the close five bars until you do this: choppy markets look like a webcob and stable markets form a thin ribbon. Perhaps there is something to dig in this way...