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Bollinger Band Width and %B: An Overview Zig Zag Indicator
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The CHATS Indicator

Trading tools evolve continuously, always aiming to provide traders with sharper, clearer insights into market dynamics. One of the latest innovations in this sphere is the Chande Absolute Trend Strength (CHATS) indicator, which is exclusive to TrendSpider. Developed by the eminent Dr. Tushar Chande, this tool offers a unique perspective on the market’s momentum and trend persistence. In this article, we learn what the CHATS indicator is and how to use it in TrendSpider.

Who is Dr. Tushar Chande?

Dr. Tushar Chande is a renowned figure in the field of technical analysis with a deep-rooted background in both engineering and financial research. Holding a Ph.D. in Metallurgical Engineering, Dr. Chande’s analytical prowess and systematic approach have been influential in shaping various technical indicators and trading methodologies. He is credited with developing several popular technical indicators, including the Stochastic RSI, Aroon, Aroon Oscillator, Chande Kroll Stop, Chande Momentum Oscillator, Forecast Oscillator, and Variable Index Dynamic Average.

Beyond this, Dr. Chande has authored several prominent books, including “Beyond Technical Analysis,” where he offers a comprehensive view of trading system development and implementation. With numerous contributions to financial publications and continuous efforts to enhance trading tools, Dr. Chande remains an integral voice in the trading community, advocating for research-driven strategies and innovations.

Understanding CHATS

The Chande Absolute Trend Strength (CHATS) indicator is crafted to capture both momentum and trend persistence. It amalgamates the 14-day RSI, normalized 100-day returns, breakouts of bars beyond the 100-day price channel, and 25-, 50-, 75-, and 100-day Bollinger bands. The computational structure assigns a weightage of 30% to momentum and 70% to trend persistence.

During significant trends, CHATS usually fluctuates above +50 (or below -50). Stronger trends can push it beyond +70 (or below -70). In cases of robust momentum surges, CHATS can even breach +90 (or drop below -90), potentially pegging at the extremes (+100 or -100).

Though CHATS is primarily intended for daily data, it remains effective and reliable for 30-minute to 4-hour time frames. Time intervals less than 10 minutes can produce noisier results.

Implementing CHATS on Charts

TrendSpider users can simply search ‘CHATS’ in the indicator list to add this tool to their charts. Two versions are available:

  1. On-chart CHATS Indicator: This overlays strength levels directly on price candles. Bright green signifies the strongest positive trends, grey symbolizes a neutral trend, and bright purple illustrates the most potent negative trends.
  2. Lower CHATS Indicator: This version manifests as an oscillating line between positive and negative extremes. The middle line serves as a delineator between moderate positive and negative trend conditions.

Customizing CHATS

Upon accessing the indicator parameters, users will find an editable ‘Threshold’ value. By default, it is set at 70. This benchmark defines strong trends as those readings above +70 and weak trends as those below -70.

Leveraging CHATS Across TrendSpider

Beyond its primary utility, the CHATS indicator can be harnessed for various functions on TrendSpider:

  1. Alerts: Users can set alerts for specific CHATS conditions on their preferred tickers. This is especially handy for traders who want to be notified immediately when certain criteria are met, instead of constantly monitoring the charts themselves.
  2. Market Scanning: With a market scanner that integrates the CHATS indicator, users can swiftly scan the market for tickers that meet specific CHATS criteria. This makes it easier for traders to spot potential trading setups without manually sifting through hundreds of charts. Additionally, the availability of pre-made shared scanners allows newer traders to benefit from the collective expertise of the trading community.
  3. Strategy Testing: Strategy testing or backtesting is vital for traders who want to see how a particular strategy would have performed historically. By integrating CHATS into strategy testers, traders can validate or optimize their trading strategies using past data to determine the indicator’s effectiveness.

The potential of CHATS extends to trend-following, counter-trend strategies, and even comparisons of trend strength across multiple assets. Dr. Tushar Chande’s extensive trading experience is encapsulated in the CHATS indicator, reflecting his systematic trend-following approach.

Pros and Cons of the CHATS Indicator

As with any technical indicator, CHATS has its strengths and limitations. Here are some pros and cons of the CHATS indicator:

Pros:

  1. Comprehensive Analysis: Unlike some indicators that focus solely on price or volume, CHATS combines momentum and trend persistence, giving a more holistic view of the market.
  2. Integration of Established Metrics: By incorporating principles from the 14-day RSI and normalized 100-day returns, CHATS builds on established, trusted metrics in the industry.
  3. Predictive Insights: The ability to assess price breakouts over a 100-day span offers forward-looking insights, allowing traders to potentially anticipate market shifts.
  4. Versatility: CHATS can be applied across various asset classes and time frames, making it a versatile tool for different trading strategies.

Cons:

  1. Complexity: Due to its multifaceted approach, the CHATS indicator might be challenging for beginner traders to grasp and utilize fully.
  2. Risk of Over-Reliance: With its in-depth analysis, traders might become overly dependent on CHATS, neglecting other crucial factors or indicators in their decision-making process.
  3. False Signals: No indicator is foolproof. CHATS, despite its thorough analysis, might occasionally produce false signals, leading traders astray.
  4. Requires Adequate Data: To operate efficiently, CHATS requires a sufficient amount of historical data, which might not always be available, especially for newer assets or those with low liquidity.

While the CHATS indicator offers a comprehensive and detailed approach to market analysis, it’s essential for traders to understand its limitations.

The Bottom Line

The introduction of the Chande Absolute Trend Strength Indicator to TrendSpider is a testament to the continuous evolution of trading tools, aiming to provide traders with unparalleled insights. The CHATS indicator, with its comprehensive nature, stands as a testament to Dr. Tushar Chande’s ingenuity and his commitment to enriching the trading community. Like every trading tool, CHATS should be used judiciously, keeping in mind the risks involved in trading.

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Bollinger Band Width and %B: An Overview Zig Zag Indicator