Chaikin's Volatility

Type

Volatility indicator

Short introduction

Marc Chaikin developed this indicator. Volatility is measured here by the difference between the daily low and the daily high.

Statement

Chaikin's Volatility (CVI) fluctuates around the zero line, a positive indicator value indicates increasing volatility (that is, increasing differences between high and low). A negative indicator value shows a decreasing volatility, that is, a decreasing difference between high and low.

For the calculation, the difference between the daily high and the daily low is formed first. An MA is calculated on this and a ROC is calculated on this.

Formula/calculation

Calculation of an MA (for example, 10 days) on the difference of daily high and low:

EMA (H-T)

Calculation of the percentage change of this MA over a given period n (such as 10 days):

[[EMA (H-T) - (EMA(H-T) n periods prior)] divided by (EMA(H-L) n periods prior)] *100

Interpretation

With the setting for MA and ROC described, the indicator generates buy signals when it crosses the zero line from bottom to top and sell signals when it crosses the zero line from top to bottom. Chaikin's Volatility is usually not used to derive specific signals, but rather to "round out" a trading system.

Default setting

Smoothing methods you can select:

• EMA (exponential moving average) (default setting)
• MA (moving average)
• WMA (weighted moving average)

Example: Chaikin's Volatility