Chaikin's Volatility technical indicator compares the spread between a stock's high and low prices. It quantifies volatility as the range between the high and the low price.

Computing:

R = EMA(H - L, nperiods)

CV= (Ri  - Ri-1) / Rn-nperiods+1
Where EMA represents the exponential moving average.

R is the n-period exponential moving average of the difference between the security's high and low prices.
Ri is the value of R at period i.
Ri-1 is the value of R of the previous period.
Rn-nperiods+1 is the value of R nperiods ago.

There are two typical trading rules to interpret this indicator:

1) Assume that market tops are accompanied by increased volatility and that the latter stages of a price bottom are indicated by decreased volatility.

2) Assume that a short-time increase in the volatility indicator indicates that a price is hitting bottom and that a longer term decrease in volatility indicates an price peak.

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