How it is calculated
The sum of the true ranges over the last length bars, divided by the highest high minus the lowest low of the same bars; the base 10 log of that ratio, divided by the base 10 log of the length, times 100. The first bar has no true range, so the first value comes one bar after the first full window. A window with no range has no value. After Dreiss 1993.
Reference: Dreiss 1993
How to read it
Above 61.8 the market is often called choppy and a trend unlikely to hold, below 38.2 trending. Long stretches of high values are often followed by a breakout, low values by a pause. The two levels are Fibonacci numbers by convention, not a law.
In a strategy
A regime filter: let a trend system trade only while ctx.ind("chop", length=14) is below 38.2, and a range system only while it is above 61.8.
Inputs
| Input | Type | Default | Range or choices |
|---|---|---|---|
Lengthlength | Whole number | 14 | min 2, max 5000 |
What it draws
| Line | Drawn as |
|---|---|
| CHOP | Line |
Moves between 0 and 100. Guide lines at 38.2, 61.8.
Used in
No strategy template reads it yet.