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.
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.