The Chop zone indicator is an indicator series used by traders to identify trends and choppiness in a market visually. The chop zone was derived from the choppiness indicator created by E.W. Drelss. The indicator is plotted in -100 to 100 levels to illustrate the difference between close price and its EMA by converting its values to colors.
Features of the chop zone indicator
• Uses exponential moving averages
• Uses color to display values
• Compares the current price closeness to the moving average
• It gives direction and choppiness of an asset
Understanding the Chop Zone Indicator
Based on calculated Exponential Moving Averages (EMA) values, the indicator uses levels between -100 and +100. A high probability of market choppiness is indicated when chop zone mark +100. On the other hand, a strong trending in either direction is displayed when the Chop Zone indicator marks -100. (Try out indicators on Tradingview.com)
All this data is displayed in colors when a certain color spectrum shows an above-average ema and supports an uptrend. Another color spectrum is expressed as a falling trend with bearish movement and a low ema.
The more a value is closer to 100, the more the asset is registering choppiness, and the closer the calculated value is to -100, the stronger the asset is directional trending.
Usually, traders and analysts use a threshold to note the market trend’s getting more choppy. In turn, there is also a threshold that indicates directional trends meaning there is no choppiness.Chop Zone Indicator | Indicator Series Click To Tweet
Uses of chop zone indicator
The Chop Zone gives an analysis to the traders on whether a trend is choppy or not. Therefore, traders can determine the overall direction of a trend. With its association with visual indicators and Short/long and Close/reverse Positions, Traders can get alerts for the Choppiness Index (CHOP).
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