Choppiness Index

What is the Choppiness Index?

The Choppiness Index (CHOP) is an indicator, developed by E. W. Dreiss, that compares the sum of recent true ranges with the highest high minus the lowest low over the same bars. At a fixed lookback, a higher reading means more summed true range relative to that high-low span. Traders use this relationship to define conditions for trend and range setups, while direction comes from the price chart.

How is the Choppiness Index calculated?

CHOP(n) = 100 × log(sum of the last n one-period true ranges / window range) / log(n).

Use n greater than one and a positive window range. True range is max(high, previous close) minus min(low, previous close). The window range is its highest high minus its lowest low. Use the same logarithm base in numerator and denominator.

With 14 true ranges averaging 3.20 points, the sum is 44.80. A high of 104 and low of 96 gives an 8-point window. CHOP is 100 × log(5.60) / log(14) = 65.28.

Keep the sum at 44.80 and expand the window to 40 points: CHOP becomes 4.29. The comparison shows exactly how the denominator affects the reading.

Choppiness Index 61.8 and 38.2 levels

The standard 14-period chart commonly shows guides at 61.8 and 38.2. They correspond to summed-true-range ratios of approximately 5.11 and 2.74. Define the threshold and crossing that your setup uses.

A reading of 72 has a larger ratio than 63 at the same lookback. Both exceed 61.8, while the difference still describes a change in the underlying ratio.

The formula maps ratios of 1 and 14 to readings of 0 and 100. The first bar’s true range includes a previous close outside the window. An outside gap can therefore produce a ratio above 14 and a raw reading above 100. Preserve that calculated value.

How CHOP relates to price path, ADX and ATR

Summed true range measures accumulated spans, rather than every intrabar price movement. The window’s high-low span also differs from its first-to-last close change.

For a 14-bar path from 100 to 120 and back to 100, summed true range of 40 against a 20-point window gives CHOP 26.26. Read the price path alongside that number to identify the completed round trip.

CHOP and ADX are separate calculations. CHOP compares range measures; ADX smooths directional imbalance. Use ATR to add the movement scale in price units.

How traders use the Choppiness Index

Set the price event, CHOP condition and decision bar. One example is a close above a defined resistance level with CHOP below 38.2. Specify the entry, invalidation, position size and exit around that event.

If the rule needs distinct entry and exit thresholds, state them directly. For example, activate a trend filter below 38.2 and deactivate it above 50. Evaluate those rules together with the chosen bar interval and session.

Below 38.2, sort Options Flow by Heat Score for the highest-conviction prints in the ticker, then use the Options Profit Calculator to put a dollar figure on the time decay each structure pays if CHOP climbs back above 50.

Limitations of the Choppiness Index

• Read direction from the price chart. The same CHOP reading can come from a rising, falling or flat market.
• Pair a low reading with a new high or low in price before treating the trend as progressing. A 14-bar round trip from 100 to 120 and back to 100, with 40 points of summed true range, reads 26.26, below the 38.2 guide, even though price ends where it started.
• Retest the 61.8 and 38.2 guides at any new lookback. Changing the lookback changes both the observations and the logarithmic normalization, so thresholds do not carry over between settings.
• Read price for the first sign of a regime change. CHOP describes the window just completed, so a change in regime shows up only as new bars replace old ones.
• Take the movement scale from ATR. CHOP is a ratio with no price units, and an outside gap can push a reading above 100.

Bottom line

The Choppiness Index measures how much ground price covered relative to the span of its window, which makes it a direction-free filter for separating range conditions from trend conditions. Use it as one stated condition with a defined price event, read direction from the chart and scale from ATR, and check the price path before trusting a low reading.