Hello, traders, and welcome to another software update! In this update, we’re pleased to announce a very special new indicator that’s exclusive to TrendSpider; The Chande Absolute Trend Strength (CHATS) indicator by Dr. Tushar Chande. Details after the jump!
Recently, we partnered with our friend, Dr. Tushar Chande, creator of the Stochastic RSI, Aroon, Aroon Oscillator, Chande Kroll Stop, Chande Momentum Oscillator, Forecast Oscillator, and Variable Index Dynamic Average to bring a very special new indicator exclusively to TrendSpider users! This new indicator is called the Chande Absolute Trend Strength (CHATS) indicator. Let’s dig into how it works!
The Chande Absolute Trend Strength (CHATS) indicator is a breakout-friendly indicator that measures both momentum and trend persistence. CHATS can be used on any exchange, instrument type, and charting interval.
The indicator combines 14-day RSI and normalized 100-day returns, and the breakout of each bar beyond the 100-day price channel, and 25-,50-, 75-, and 100-day Bollinger bands. The calculations assign 30% of the weight to momentum and 70% to trend persistence. The calculations have been tweaked and the scale has been changed from prior versions.
By design, CHATS will fluctuate but remain above +50 (or below -50) during major trends. During very strong trends, it will remain above +70 (or below -70). During momentum surges, it will remain above +90 (or below -90) and can get “pinned” to +100 (or -100).
The indicator is designed for daily data. However, the indicator works predictably from 30-min to 4-hr time frames, though intervals shorter than 10-minutes can be noisier.
In order to add this indicator to your chart, search ‘Chats’ in your indicator list. There are two options to choose from; the ‘On-chart’ CHATS indicator and the ‘Lower’ CHATS indicator.
The ‘On-chart’ indicator will automatically paint the strength level directly onto the candles. A bright green color represents the strongest positive trend reading. As the trend weakens, the gradient shifts from greenish-grey to grey. The grey color represents a ‘neutral’ trend. As grey shifts to pink, the trend strengthens again, but to the downside. When the downward trend is the strongest, the candles will be painted a bright purple color.
The ‘Lower’ version of the indicator features a line that oscillates between upper and lower extremes. When the reading is above +70, that represents the strongest positive trend, and below -70 represents the strongest negative trend. Much like many other lower indicators that oscillate between extremes, there is also a middle line that delineates between moderate positive and negative trend conditions.
When you open the indicator parameters, you’ll notice just one editable value, called ‘Threshold’.
Simply, the threshold setting helps traders understand the current strength of the trend. By default, it is set to a value of 70, which sets its ‘strong trend’ reading above +70 and its ‘weak trend’ reading below -70.
The CHATS indicator can be used across the platform. Users can be alerted on, scan for, and even strategy-test CHATS conditions!
Scanning For CHATS Setups
There are several pre-made shared scanners that utilize CHATS conditions that are currently available for all users. These scans include:
- CHATS Strong Uptrend Breakdown – This scanner looks for setups in which an asset has had a ‘strong uptrend’ reading (above +70) for the past two weeks and is now failing below the +70 level.
- CHATS Strong Downtrend Breakout – This scanner looks for setups in which an asset has had a ‘strong downtrend’ reading (below -70) for the past two weeks and is now breaking above the -70 level.
In addition to these shared scans, we’ve also created several additional scans that you can add to your account today! These scans include:
- CHATS < -70 Cross-Down – This scanner looks for setups in which an asset has just broken below the -70 level after trading above it for several weeks.
- CHATS > +70 Cross-Up – This scanner looks for setups in which an asset has just broken above the +70 level after trading below it for several weeks.
CHATS In The Strategy Tester
The CHATS indicator can be utilized in the strategy tester in any number of ways. The most basic strategy is simply trend-following after a zero crossing. Alternatively, trend-following positions can be considered when the indicator crosses above or below +/- 50, +/-70, +/-80, or +/-90 for increasing selectivity.
With this in mind, we created a strategy in which we go long the SPY when the CHATS indicator has a reading above +70 and exit the trade when the indicator reading is below -70. As can be seen in the green periods of the chart below, this simple strategy has a knack for riding up trends and getting out before big drops!
Another way to utilize CHATS in your strategies is to look for countertrend or reversal opportunities within the weakest or strongest instruments. For example, in this strategy on NVDA, we go long when CHATS is less than -70 and exit the trade using a range low break and a take profit. The results speak for themselves!
To learn more about the CHATS indicator, watch our interview with Dr. Chande!
Click here to download the AAPL strategy discussed in this video!