The Chaikin Volatility Volatility Indicator (CHV) takes into account changes in the spread between the maximum and minimum prices. It determines the amount of volatility based on the width of the range between the high and low. In this case, unlike the Average True Range, the Chaikin indicator does not take into account gaps.
According to Chaikin’s interpretation, the growth of the volatility indicator in a relatively short time indicates the approach of prices to the base (for example, with panic dumping of paper), and the fall in volatility over a longer period means the proximity of the top (eg, in a mature bull market).
It is recommended to use indicators Moving Averages and Envelopes as confirmation of Chaikin Indicator signals.
The peak of the indicator occurs when market prices are receding from a new peak and the market is moving to flat.
The market in flat corresponds to low volatility. The exit from the lateral movement (flat) is not accompanied by a significant increase in volatility.
Volatility increases as the price level rises above the previous high.
The increase in the level of the Chaikin indicator continues the advance to a new peak in prices.
A sharp decline in volatility indicates a slowdown and a possible pullback.
Calculation of Chaikin Volatility
HL (i) = HIGH (i) – LOW (i)
HL (i-10) = HIGH (i-10) – LOW (i-10)
CHV = (EMA (HL (i), 10) -EMA (HL (i-10), 10)) / EMA (HL (i-10), 10) * 100
HIGH (i) – the maximum price of the current bar;
LOW (i) – the minimum price of the current bar;
HIGH (i – 10) – the maximum price of the bar, which is ten positions from the current one;
LOW (i – 10) – the minimum price of the bar, which is ten positions from the current one;
HL (i) – the difference between the maximum and the minimum price at the current bar;
HL (i – 10) – the difference between the maximum and minimum price by ten bars before;
EMA is the exponential moving average.