Choppiness Index

Trend

What it measures

The Choppiness Index (CHOP) measures whether a market is in a trending or ranging/sideways mode, outputting values between 0 and 100. High values (above 61.8) indicate a choppy sideways market; low values (below 38.2) indicate a directional trending market. It helps traders select the right type of strategy for current conditions.

How readings are interpreted

The Fibonacci levels 38.2 and 61.8 are used as thresholds. Above 61.8: too choppy — avoid trend-following strategies, use mean-reversion. Below 38.2: strong trend in place — use trend-following strategies. CHOP falling from above 61.8 toward 38.2 signals a new trend may be forming.

Conventional levels

Above 61.8: Choppy/ranging market — use oscillators (RSI, Stochastic) not trend indicators
Below 38.2: Trending market — use trend-following (EMA crossovers, Supertrend, MACD)
61.8 breakdown: trend beginning to form — reduce mean-reversion positions
38.2 breakout upward: trend losing momentum — prepare for ranging conditions
50 is the neutral zone

Where it works, and where it does not

CHOP is a pure regime indicator — it does not indicate direction; it characterises the market regime. It works on all timeframes and asset classes. Extremely useful as a filter layer before taking any trade.

Commonly read alongside

ADX: Both ADX and CHOP confirm the same regime — ADX > 25 corresponds roughly to CHOP < 50
RSI: Only act on RSI overbought/oversold when CHOP > 50 (ranging confirmed)
MACD: Only act on MACD crossovers when CHOP < 50 (trending confirmed)

Known limitations

CHOP doesn't tell you the DIRECTION of the trend — combine with directional indicators
In fast-moving markets, CHOP can lag behind actual regime changes by several bars
CHOP below 38.2 means trend is strong — but the trend could be up OR down

In practice

Add CHOP to your decision checklist before every trade: 'Is this a trend or range market?'
Alert setup: when CHOP drops from 61.8 to below 50, scan for breakout setups
Backtesting insight: strategies that perform well have 'regime-conditional' rules — CHOP makes this explicit
Combine with 14-period ATR: low ATR + high CHOP = extreme compression before potential breakout

Plot it yourself. Add this indicator to a chart, change every parameter and watch the line move, then backtest how the rule would have behaved on historical data — free on the S&P 500 ETF, no card.

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This is reference material, not advice. It describes what each indicator measures and how its readings are conventionally interpreted. Nothing here is a recommendation to buy or sell anything, and no indicator predicts future prices. GU Analyser is an analytical tool — no money is ever traded here.