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= (R_{i} - R_{i-1}) / R_{n-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.

`R`_{i} is the value of `R` at period
`i`.

`R`_{i-1} is the value of `R` of the
previous period.

`R`_{n-nperiods+1} is the value of `R`
`nperiod`s 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.