Choppiness Index Trading Strategy

The Choppiness Index, developed by Australian commodity trader Bill Dreiss, measures whether a market is trending or moving sideways.

In a choppy market, prices fluctuate within a narrow range or show consolidation. The index ranges from 0 to 100—lower values suggest a stronger trend, while higher values indicate more choppy, range-bound conditions.

Choppiness Index trading strategy – trading rules and backtest

We backtested SPY, the ETF that tracks the S&P 500 (the trading rules are further down):

We made the following trading rules: