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Chalkin Volatility was developed by Marc Chaikin. It is a volatility indicator which calculates the Exponential Moving Average of the difference between the current interval’s high and low prices and its value a number of periods previously. A sudden increase indicates a directional move and over time the current and historical Exponential Moving Average tend to align which results in the Chaikin Volatility indicator tending towards zero.
The indicator fluctuates around zero, with high values indicating that prices are changing sharply compared to the recent past, whilst low values indicate that prices are stable and staying relatively constant.
The default parameters used to calculate Chaikin's Volatility indicator are 10 periods for the Exponential Moving Average time frame and 10 for the number of data periods used to calculate the percent change i.e. the “rate of change” period (ROC). Increasing the number of periods decreases the sensitivity of the indicator, whilst decreasing the number of periods increases the sensitivity, generating more signals.
There are different ways in which to use and interpret the indicator, based on the following premises:
- Chaikin Volatility is low if the market is trading in a side-ways range
- Prices in a strong upward trend over a long time period are accompanied by decreasing volatility
- Prices in a strong downward trend over a short time period are marked by an increase in volatility
Price breakouts are usually associated with a sudden increase in volatility when the indicator is trading near zero. Price reversals tend to be associated with the indicator being extended and then returning to zero.
Chaikin Volatility Formula
To calculate the Chaikin Volatility indicator, the first step is to determine the Exponential Moving Average of the High price minus the Low price over periods, where the default 10:
The Chaikin Volatility indicator is calculated by determining how much it has changed in value over (Rate Of Change) period, where the default value is 10:
Chaikin Volatility Indicator
The Chaikin Volatility indicator can be displayed on the TimeToTrade charts. To add the Chaikin Volatility indicator to the TimeToTrade charts, go to the chart settings and click on the 'Add Indicator' button. Click on the search box and type the name of the indicator that you are looking for, or for example type Chaikin Volatility and scroll through the results:
After adding the Chaikin Volatility indicator, within the chart settings, click on it to set the parameters and change colours.
Chaikin Volatility Alerts
Alerts can be set up to provide an Email or SMS text message notification of when your Chaikin Volatility indicator chart conditions have been met, backtest trading strategies or execute demo trades. To learn more:
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