Chaikin Volatility Indicator
Technical Factors
factor.formula
CVI(N) =
Parameter Description:
- :
The observation period indicates the period length for calculating the exponential moving average (EMA), and the default value is 20. The smaller the N value, the more sensitive the CVI is to changes in price fluctuations; the larger the N value, the smoother the CVI is to changes in price fluctuations.
- :
The highest price of the current period.
- :
The lowest price of the current period.
- :
Exponential moving average (HIGH-LOW) with period N.
- :
The exponential moving average of (HIGH-LOW) N periods ago. That is, the current EMA value is shifted forward by N periods.
factor.explanation
The calculation logic of the CVI indicator is as follows:
- Calculate the price difference within the period: For each time period, calculate the difference (HIGH - LOW) between the highest price (HIGH) and the lowest price (LOW) to reflect the price fluctuation range of the period.
- Calculate the exponential moving average (EMA): Calculate the N-period exponential moving average (EMA(HIGH-LOW, N)) of the price difference (HIGH - LOW). EMA focuses more on recent data than the simple moving average, so it can reflect changes in volatility more quickly.
- Calculate the volatility change rate: Calculate the difference between the current EMA value and the EMA value N periods ago, and then divide it by the current EMA value to get a relative change rate. Finally, multiply by 100 to convert the result into a percentage.
Interpretation of CVI value:
- Positive value: Indicates that the volatility of the current period is higher than the volatility N periods ago, which may mean that market volatility is increasing.
- Negative value: indicates that the volatility of the current cycle is lower than the volatility N cycles ago, which may mean that market volatility is weakening.
- Increase in absolute value of value: indicates that the price volatility changes by a large margin.
- Decrease in absolute value of value: indicates that the price volatility changes by a small margin.
Application of CVI indicator:
- Trend confirmation: When the price trend is upward, the increase in CVI value may further confirm the upward trend. When the price trend is downward, the increase in CVI value may indicate the strengthening of the downward trend.
- Volatility breakthrough identification: When the CVI value rises sharply, it may indicate that the market volatility is breaking through, and it can be used in conjunction with other indicators to judge trading signals.
- Divergence analysis: When the CVI value diverges from the price trend, it may indicate the possibility of a trend reversal. For example, when the price reaches a new high but the CVI value decreases, it may indicate a weakening of the upward momentum.