✔️ Information reviewed and updated in December 2023 by Eduardo López
Volatility turns out to be one of the factors that you should take care of the most when making an investment in different assets. This is because it can make you go from having millions to losing everything in a matter of a single movement in the market.
To determine it, there are different types of indicators, one of them is the Chaikin Volatility index. Although it sounds a bit strange, even to a movie title, this is a high value indicator. That is why here we will talk about everything you should know about this data.
✨What is Chaikin Volatility? ✨
Created by Mark Chaikin, this financial indicator is represented in the form of lines on a graph which are responsible for measuring volatility. In this way, we can say that the Chaikin indicator is data in charge of analyzing price volatility.
Like other indicators, it helps to know what the potential changes in market prices will be. It allows us to analyze the range that exists between the maximum and minimum prices of the day.
✨ What is Chaikin Volatility used for? ✨
This indicator is used, like other indicators, to measure the amplitude that exists between the maximum and minimum prices of assets during the day. In this way, the volatility existing in said asset can be analyzed.
The greater the range, the greater the volatility that we find in the market and the smaller the amplitude, the less volatility. Furthermore, this It is also very useful when determining trends because the width of the range can help us to try to assess whether the market will be up or down.
✨ How is it calculated? ✨
Another of the similarities that it shares with other volatility indicators is in the way this indicator is calculated. The first thing that is needed are the maximum and minimum prices in a given period of time.
To determine it accurately it is necessary to determine an exponential moving average known as EMA. It is from the EMA that we get to know what the Chaikin Volatility is. Actually, it is not as complex as it seems, but it can be time consuming.
✨ What can we use it for? ✨
Imagine that you want to invest in certain assets and you do it considering that they are safe, but, from one day to the next, everything changes thanks to volatility. Having this indicator on your side could have saved you from losing everything.
This is because this indicator gives you an overview of the volatility of the asset, the changes in trend and the risk when investing. A) Yes, You can make better decisions with the certainty of knowing if that asset is stable in prices, or on the contrary, it is a roller coaster.