Using the Choppy Market Index to Filter Trend and Range Conditions

Summary

The Choppy Market Index (CMI) is presented as a 0–100 indicator for assessing whether price action is more consistent with a trend or an unstable, choppy market. The article describes using a moving average of CMI together with the indicator histogram: lower readings are associated with unstable conditions, while higher readings are treated as more favorable for trend trading. It gives separate buy, sell, and position-closing conditions for the two regimes, using threshold levels around 40, 50, and 60.

The indicator is also suggested as a filter within trend-following systems. However, the supplied text omits the actual calculation formula, so readers cannot reproduce the indicator from this description alone. It provides rules but no backtest, asset, timeframe, parameter-sensitivity, or transaction-cost evidence; the thresholds should therefore be understood as unvalidated guidance rather than established performance claims.

Key ideas

• CMI values are described as a gauge of whether market behavior is trending or choppy.
• The suggested rules combine CMI thresholds with a moving average and histogram direction.
• Separate entry and exit conditions are proposed for unstable and trend markets.
• The text suggests using CMI as a filter in trend-following strategies.
• The formula is absent, and the rules are presented without performance evidence or implementation details.

Tags

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