The Chop Zone is an indicator found on Trading View that can help you visualize the choppiness of a market or given security. Choppiness in this case measures if the security is trading sideways or within a trend.
The Chop Zone has no forecasting value and is not designed to be used to predict market action. Instead, it’s used to illustrate if a market is moving sideways or trending in a given direction.
How to read the Chop Zone
When you use the Chop Zone on Trading View you’ll see a chart with multiple colors. These colors change depending on the choppiness of the price action. The darker the colors are, the more choppy the prices are. Conversely, lighter colors show less chopiness and therefore a stronger price trend.
The colors are as follows:
- Red, very choppy
- Blue, very strong trend
- Yellow, neutral
- Other light colors, weak trend
- Other dark colors, weak choppiness
How is the Chop Zone calculated?
In Trading View, the Chop Zone is calculated using a 30-period EMA. The bars are then color-coded to match how close the prices are to this moving average.
How to use the Chop Zone
As stated previously, the Chop Zone has no forecasting value and cannot predict future prices (which is unlike other indicators such as the RSI or MACD). Instead, the Chop Zone gives you a visual representation of price volatiltiy as well as the strength of a security’s directional movement.
Instead of predicting future prices, the Chop Zone can be used to confirm the strength of the underlying trend. Another way that you can ue the Chop Zone is by analyzing long periods of consolidation or sideways movements. Some technicians believe that extended sideways movements often foreshadow substantial trends to either the upside or the downside.
By looking a the Chop Zone, you can anticipate a change in price trend if you can see a substantial sideways trading motion.