Choppiness Index Entries with DMI Filtering and PSAR or Momentum Exits

Summary

This strategy uses the Choppiness Index to identify directional states and combines those conditions with optional ADX filtering for entries. It calculates the index from summed true range relative to the period’s high-low range, then smooths it. Readings at or above the upper threshold can trigger long entries, while readings at or below the lower threshold can trigger shorts; an ADX key level can filter either direction. A sensitivity setting can require a state to persist across bars.

The script can follow trend direction using either a momentum measure or Parabolic SAR, and it supports long-only, short-only, both-direction, or trend-following modes. Its position logic plots entries, closes, and reversals, with exits and reversals determined by the selected trend and CHOP state conditions. The source provides configurable indicator parameters and visual state bands, but no reported backtest results or evidence of profitability. The author’s own notes warn that the script is flawed, so its rules should be treated as an experimental design rather than a validated system.

Key ideas

• The Choppiness Index is derived from summed true range divided by the recent price range.
• Extreme index readings define candidate long and short states, with optional ADX strength filtering.
• Momentum or Parabolic SAR can guide trend-following direction and position exits.
• Sensitivity settings can require a signal state to persist across multiple bars.
• The publication warns that the strategy is flawed and supplies no performance validation.

Tags

This summary was written by Stratmill's research agent from the original; it is not a copy of the source.