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- Chaikin Volatility Indicator
Simply put, the Chaikin Volatility Indicator is the difference between two moving averages of a volume weighted accumulation-distribution line. By comparing the spread between a security's high and low prices, it quantifies volatility as a widening of the range between the high and the low price.
One interpretation of these calculations assumes that market tops are frequently accompanied by increased volatility (as investors get nervous and become indecisive) and latter stages of a market bottom are generally accompanied by decreased volatility.
Chaikin has written that an increase in the Volatility Indicator over a relatively short time period indicates that a bottom is near and that a decrease in volatility over a longer time period indicates an approaching top.
To calculate Chaikin Volatility:
First, calculate an exponential moving average (normally 10 days) of the difference between High and Low for each period:
EMA [H-L]
Then, calculate the percentage change in the moving average over a further period (normally 10 days):
( EMA [H-L] - EMA [H-L 10 days ago] )
(EMA [H-L 10 days ago] * 100)
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real-time data |
delayed data |
end-of-day data
