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Chop Zone & Standard Error Bands

by | Sep 20, 2020

Disclaimer: Posts on the HyperTrader blog and associated HyperLinq websites are for educational and informational purposes only. These posts should not be taken as financial advice, nor are they meant to be viewed as trading advice. HyperLinq Inc. or the authors take no responsibility for any damages or losses.

When trading crypto assets, it is crucial to recognize market conditions. Crypto traders will use several technical analysis tools at the same time to better understand market conditions. This blog will discuss two technical indicators, the Chop Zone & Standard Error Bands, which help crypto traders make better trading decisions in markets like BTC & ETH.

Chop Zone

Australian commodity trader E.W. Dreiss created the Chop Zone. Chop Zone is a trading indicator that assists crypto traders to conclude if the crypto market is irregular (trading sideways) or not irregular (trading within a trend in both directions). The Choppiness Index is an illustration of a trading indicator that is not directional at all. The Chop Zone plots within the -100/+100 levels, the Chop Zone represents the distinction between close price and its EMA by transforming its values to color representation.

Since Chop Zone is a range-bound oscillator, the Choppiness Index holds rates that frequently happen within a specified range. CHOP produces values that operate between 0 and 100. The closer the matter is to one hundred, the higher the choppiness levels. The closer the value is to zero, the more influential the market is trending. 

Standard Error Bands

Chop Zone & Standard Error Bands
Chop Zone & Standard Error Bands Indicator on HyperTrader

Paul Kirshenbaum initially produced Standard Error Bands. Standard Error Bands portrays market trends and price volatility around the direction. SEB applies the standard error of linear regression of the closing price to discover bandwidth. This has the result of estimating volatility around the current trend sooner than measuring volatility for direction adjustments. Many crypto traders utilize SEB to find the strength of a specific pattern and possible reversals of trends or values stabilization. There are three elements to Standard Error Bands: the Smoothed Linear Regression outline, Upper SEB and Lower SEB.

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