Developed by Marc Chaikin, the Chaikin volatility indicator depicts volatility by calculating the difference between the high and low for each period or trading bar. It measures the difference between two moving averages of a volume-weighted accumulation distribution line.

It therefore differs from the simple Average True Range (ATR) indicator in that it does not account for gaps.

This aspect is good for short-term traders; gaps often occur overnight and can cause peaks in volatility to be downplayed.

The Chaikin indicator, however, shows precisely when the market starts to move. It’s default settings are left at 10,10.

The Chaikin in action

The great thing about the Chaikin indicator is that it often peaks at around the same time every single day. This means that is the perfect tool for helping to time your trades.

// Chaikin Volatility
//
// https://www.investopedia.com/terms/c/chaikinoscillator.asp
// https://www.incrediblecharts.com/indicators/chaikin_volatility.php
//
DEFPARAM CalculateOnLastBars = 1000
Periods    = 10
AvgT       = 1
Periods2   = 10
AvgT2      = 0
Periods      = max(1,min(999,Periods))
AvgT         = max(0,min(6,AvgT))
Periods2     = max(1,min(999,Periods2))
AvgT2        = max(0,min(6,AvgT2))
HImenoLO     = high - low
x1           = average[Periods,AvgT](HImenoLO)
x2           = average[Periods2,AvgT2](HImenoLO[Periods2])
VolatChaikin = ((x1 - x2) / x2) * 100
RETURN VolatChaikin AS "Chaikin Volatility"