Choppiness is a function of market direction. A market that is trending has a low choppiness number while a trend less market has a high choppiness number. The Choppiness Index ranges between 0 and 100, the higher the index the choppier the price action is and the lower the index the more trending the price action. Since Choppiness is a trending indicator it has a length, which sets the look back period (in Connect the default length is14 periods).
There are two bands in the Choppiness indicator: Upper Band and Lower Band. To Edit parameters for the Choppiness Study:
1 Right click on the study and select Edit Study from the menu.
2 In the Study Properties dialog box that appears, you may change:
Length
Upper Band
Lower Band
Display Color and Line Properties
Upper Band (default value=61.8) - You may toggle the Upper Band line on or off and specify its color and line properties.
Lower Band - (default value = 38.2) You may toggle the Lower Band line on or off and specify its color and line properties.
3 When you are finished making changes, click the Apply This button, followed by the OK button to apply your changes to the current Advanced Chart window. Click Apply This to make the changes to the current study while the Properties window is open. Click Apply All if you made property changes to several studies and want them all to change while the window is still open. If you would like to have specific settings apply to all future uses of the study, you need to use the "Save As Default" at the top of the window.
Some traders interpret low Choppiness Index readings to indicate the end of strong impulsive movements either up or down, while high readings occur after significant price consolidations.
The Choppiness indicator (CI) has an inverse relationship to price and a trend is considered broken when the CI is below the lower line and reverses. Again this does not tell you the direction of the market it just gives a fundamental different perspective on the general change of a trend. If other signals confirm that this is a turning point, it could be likely that we are headed towards a new trend direction down and it might be a good time to sell, or go short.