Chaikin volatility

Chaikin Volatility
Chalkin Volatility was developed by Marc Chaikin. It is a volatility indicator which calculates
the Exponential Moving Average of the difference between the current interval’s high and low
prices and its value a number of periods previously. A sudden increase indicates a directional
move and over time the current and historical Exponential Moving Average tend to align which
results in the Chaikin Volatility indicator tending towards zero.

The indicator fluctuates around zero, with high values indicating that prices are changing
sharply compared to the recent past, whilst low values indicate that prices are stable and
staying relatively constant.

The default parameters used to calculate Chaikin's Volatility indicator are 10 periods for
the Exponential Moving Average time frame and 10 for the number of data periods used to
calculate the percent change i.e. the “rate of change” period (ROC). Increasing the number of
periods decreases the sensitivity of the indicator, whilst decreasing the number of periods
increases the sensitivity, generating more signals.

There are different ways in which to use and interpret the indicator, based on the following
premises:

 Chaikin Volatility is low if the market is trading in a side-ways range

 Prices in a strong upward trend over a long time period are accompanied by
decreasing volatility
 Prices in a strong downward trend over a short time period are marked by an
increase in volatility

Price breakouts are usually associated with a sudden increase in volatility when the indicator
is trading near zero. Price reversals tend to be associated with the indicator being extended
and then returning to zero.

Chaikin Volatility

The Chaikin Volatility indicator is the rate of change of the trading range. The indicator
defines volatility as a increasing of the difference between the high and low. A rapid
increases in the Chaikin Volatility indicate that a bottom is approaching. A slow
decrease in the Chaikin Volatility indicates that a top is approaching.

The Chaikin Volatility indicator was developed by Marc Chaikin.

Formula:

Technical Analysis, Studies, Indicators:

Chaikin Volatility (CV)

Chaikin Volatility is a technical indicator developed to measure

price volatility through the difference between Highest High and
Lowest Low in the selected period.
 Chaikin Volatility Charts

List of Studies

 Description
 Analysis
 Formula
 Chaikin Volatility Calculator

Description
The Chaikin Volatility (CV) indicator was developed by stockbroker Mark
Chaikin and is used in technical analysis to measure volatility (should be clear
from the indicator's name). The volatility is measured by comparing the
spread between high and low prices via Rate of Change (ROC) formula. The
Chaikin Volatility indicator could be compared to ATR (Average True Range)
with difference that it does not take into account previous bar close price
(ignores gaps).

The CV indicator oscillated around zero (center) line in the range between
-100% and 100% when low negative values are indication of low volatility
and high positive readings indicate high volatility.

Technical Analysis, Signals, Trading Systems

In technical analysis volatility has important and specific function. After using
different technical indicators one could notice that the same indicator with the
same settings over prolonged period of time may have moments when signals
are generated too early, too late or at perfect time. Such indicator's behavior
is a result of changes in volatility of analyzed security - security changes its
trend faster and more often during periods of higher volatility and it tends to
have slower and rarer trend changes during periods of low volatility.
Furthermore, it could be recommended to keep an eye on volatility when
technical indicators that do not carry volatility factor in their calculations are
used and adjust your indicators' settings in accordance to the volatility
charges.

At the same time, volatility could be used to generate trading signals. Higher
volatility suggest unstable sentiment, nervous trading which is usually noted
during the market crashes, recessions and downtrends. Lower volatility is
usually associated with calm and confident trading which is a characteristic of
an up-trend. After brief history scan, you may notice following trend-volatility
dependence:

- When analyzed security is in down-trend, sharp increase in volatility during the

short-period of time could be seen near the bottom of a down-trend (correction);

- Decrease in volatility and low volatility could be seen during up-move;

- Slow increase in volatility usually during side-way trading after up-move could
be seen at the top of an up-trend and before a reversal down;

- Higher volatility could be seen during down-move.

Chart 1: DJI chart and Chaikin Volatility Indicator

Formula and Calculations
The is calculated by applying ROC formula to the High-Low price range:
1. Calculate High-Low range for the selected period of bars

HL = Highest High - Lowest Low

2. Apply Exponential Moving Average to the High-Low rage:

HLema = EMA(HL, n)

where n is bar period setting of EMA - usually the same as period used
in the step #1
3. Calculate Chaikin Volatility by using ROC formula:

CV = (HLema / HLemaPrev - 1) * 100

where HLemaPrev  is HLema value M bars ago (as for ROC

indicator).

Chaikin Volatility
Marc Chaikin measures volatility as the trading range between high and low for each
period. This does not take trading gaps into account as Average True Range does.
Chaikin Volatility should be used in conjunction with a moving average
system or price envelopes.

Trading Signals
Look for sharp increases in volatility prior to market tops and bottoms, followed by
low volatility as the market loses interest.

EXAMPLE

Dow Jones Industrial Average with   Chaikin Volatility and  Price Envelopes at
10% around a 21 day exponential moving average.

Mouse over chart captions to display trading signals.

1. A Chaikin Volatility peak occurs as the market retreats from a new high and
enters a trading range.
 2. The market ranges in a narrow band - note the low volatility.
The breakout from the range is not accompanied by a significant rise in
volatility.
3. Volatility starts to rise as price rises above the recent high.
4. A sharp rise in volatility occurs prior to a new market peak.
5. The sharp decline in volatility signals that the market has lost impetus and a
reversal is likely.

Setup
See Indicator Panel for directions on how to set up Chaikin Volatility. The default
settings are:

 H-L period of 10 days

 Volatility smoothing - 10 days

To alter the default settings - see Edit Indicator Settings.

Formula
To calculate Chaikin Volatility:

First, calculate an exponential moving average (normally 10 days) of the difference

between High and Low for each period:

                      EMA [H-L]

Next, calculate the percentage change in the moving average over a further period

(normally 10 days):

                      ( EMA [H-L] - EMA [H-L 10 days ago] ) / EMA [ H-L 10 days ago] *
100

Solution home Strategies Technical Indicators

Chaikin Volatility
Modified on: Mon, 30 Oct, 2017 at 5:12 AM

Overview
In 1966, stockbroker Marc Chaikin commenced his career on Wall Street. Successful and bright,
he started to look into technical analysis as an alternative to fundamental research. He was the one
that came up with several financial indicators that nowadays took his name. Now famous, the
Chaikin Oscillator, the Chaikin Accumulation/Distribution indicator, the Chaikin Persistence of
Money Flow indicator and the Chaikin Volatility indicator are used by traders across the world
to analyze and forecast market movements.
The Chaikin Volatility Indicator (CVI) is helpful in determining the value extent between high
and low prices on a certain period of time. It measures the volatility of a market which means it
shows the predictability percentage of that market. Different from the Average True Range, the
CVI does not take into considerations the trading gaps.
In general, Chaikin Volatility Indicator is used in conjunction with a moving average system and
on a given period of time, commonly 10 days.

Description
As the Chaikin Volatility indicator measures the instability of the stock market, its high values
indicates that prices are changing fast and a lot during the day. Prices are constant when the
indicator has low values. Basically, the flatter the CVI line on a graph, the more constant and
secure the prices are.
A graphed market time period may have level prices or trendy prices. When a market is choppy,
prices are variable and the market is insecure and contrarily, a trendy market tends to have an
explosion/implosion of prices, following a trend – going up, or down. Both trendy and choppy
markets can have high or low volatility on a certain time period, hence the 10 day generally used
interval. This way, traders can better observe the true volatility of the market.
Sometimes, elevated volatility values are used in forecasting a trend reversal, such as a turning
point in the market. Volatility peaks and abysses determine market tops and bottoms, points after
which a new trend begins, be it upwards or downwards. Consequently, inferior volatility levels
may be used to reflect the beginning of an upward price trend, which usually happens after a
market consolidation period.
To find out more about this indicator and it`s trading signals click here.

Settings in the chart

Settings in Strategies

Chaikin Volatility can be used both separately and together with other indicators in the Strategy
Builder.
Chaikin Volatility Indicator Trading
Strategy
CVI provides us with a measurement of volatility based on the range
between the high price and the low price. A much broader range means the
volatility is high. This indicator helps to identify potential tops and
bottoms. Like the ATR it does not takes into account the gaps in the chart.
This indicator is an oscillator and it oscillates above and below the zero
line. Simply speaking above 0 is considered as more volatile and below 0 is
considered as less volatile.

Chaikin Volatility Indicator or CVI was developed by Marc Chaikin. He

also has developed the Chaikin Money Flow or CMF indicator. Volatility is
depicted by the indicator because it calculates the difference between the
high and low for every period or candle.

Some Common FAQ

How do you use Chaikin Volatility Indicator?
This indicator measures the difference between two moving averages of
volume-weighted accumulation/ distribution line. Thus it differs from the
Average True Range or ATR because it does not take into account the price
gaps. When the indicator picks, the price retreats from a new high. A sharp
rise in volatility indicators occurs before the market makes a new high.
Sharp fall in volatility indicates that a reversal is likely.

What are the volatility indicators?

The volatility indicators indicate how volatile a stock, index or commodity
is at a given point of time. The more volatile a stock, the more frequent ups
and dows happen in its price. When the volatility is high, the stock’s daily
range is also high. On the other hand, when the volatility is low, the stock’s
daily range is also low.

Chaikin Volatility Indicator Formula

This indicator is a volatility indicator that calculates the exponential
moving average of the difference between the current period’s high and
low prices and its value in a number of periods previously. A sudden
increase indicates a directional move.
 Some Common FAQ
How do you use Chaikin Volatility Indicator?
This indicator measures the difference between two moving averages of
volume-weighted accumulation/ distribution line. Thus it differs from the
Average True Range or ATR because it does not take into account the price
gaps. When the indicator picks, the price retreats from a new high. A sharp
rise in volatility indicators occurs before the market makes a new high.
Sharp fall in volatility indicates that a reversal is likely.

What are the volatility indicators?

The volatility indicators indicate how volatile a stock, index or commodity
is at a given point of time. The more volatile a stock, the more frequent ups
and dows happen in its price. When the volatility is high, the stock’s daily
range is also high. On the other hand, when the volatility is low, the stock’s
daily range is also low.

Chaikin Volatility (VT)

Chaikin recommends using a 10-day moving
average when reviewing volatility.
 Volatility 
 Oscillator

Description
Marc Chaikin's Volatility indicator compares the spread between a security's high
and low prices, quantifying volatility as a widening of the range between the high
and the low price.
How this indicator works
 High values indicate that intraday prices have a wide high-to-low range. Low
values indicate that intraday prices have relatively constant high-to-low range.
 Market tops that are accompanied by increased volatility over short periods of
time indicate nervous and indecisive traders. Market tops with decreasing
volatility over long timeframes indicate maturing bull markets.

 Market bottoms that are accompanied by decreased volatility over long periods
of time indicate bored and disinterested traders. Market bottoms with
increasing volatility over relatively short time periods indicate panic sell-offs.
Calculation
Chaikin's Volatility is calculated by first calculating an exponential moving
average of the difference between the daily high and low prices. Chaikin
recommends a 10-day moving average.
Next, calculate the percent that this moving average has changed over a specified
time period. Chaikin again recommends 10 days.
OR
High Low Average = EMA of (High – Low)
Volatility = [(High Low Average - High Low Average n Periods ago) / High Low
Average n Periods ago] * 100