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How can you tell if it will be a trending or choppy day?


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How can you tell if it will be a trending or choppy day?

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  #1 (permalink)
 Eiji 
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Im in the process of developing a trading plan based on ADX(14), ZerroLag, 34/55 EMA, and SuperTrend indicators.
It is a trend following strategy trying to use the ADX to keep me out of chop. Trading off the 144 tick bar charts and looking at 5/15/30 min charts to define the trend direction.

Longs = zerro lag> 34EMA>55EMA and all are blue. ADX crosses above 20 going green within 10 bars of a supertrend switch in color to green.

Shorts are reversed with the exception of the ADX.

While looking back at the charts this strategy does do pretty well at keeping me out of the chop but probably not well enough. I would like to be able to gauge if there will be chops or waves.

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 tigertrader 
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Eiji View Post
Im in the process of developing a trading plan based on ADX(14), ZerroLag, 34/55 EMA, and SuperTrend indicators.
It is a trend following strategy trying to use the ADX to keep me out of chop. Trading off the 144 tick bar charts and looking at 5/15/30 min charts to define the trend direction.

Longs = zerro lag> 34EMA>55EMA and all are blue. ADX crosses above 20 going green within 10 bars of a supertrend switch in color to green.

Shorts are reversed with the exception of the ADX.

While looking back at the charts this strategy does do pretty well at keeping me out of the chop but probably not well enough. I would like to be able to gauge if there will be chops or waves.

Undoubtedly one of the most ludicrous, recurring themes on this forum. It bears testament to the obsessive preoccupation with useless indicators and indicators in general. What's next, an indicator to tell you when your ass itches? Try using common sense and your knowledge of price patterns, intraday seasonality, intermarket correlations, etc. instead of attempting to rely on some textbook cliche of an indicator or some other contrivance. Study the market(s) you are trading and learn it's nuances and tendencies and you'll know in advance when it's the best time to trade.

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 Silvester17 
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Eiji View Post
Im in the process of developing a trading plan based on ADX(14), ZerroLag, 34/55 EMA, and SuperTrend indicators.
It is a trend following strategy trying to use the ADX to keep me out of chop. Trading off the 144 tick bar charts and looking at 5/15/30 min charts to define the trend direction.

Longs = zerro lag> 34EMA>55EMA and all are blue. ADX crosses above 20 going green within 10 bars of a supertrend switch in color to green.

Shorts are reversed with the exception of the ADX.

While looking back at the charts this strategy does do pretty well at keeping me out of the chop but probably not well enough. I would like to be able to gauge if there will be chops or waves.

I like to look at a volume profile where you can see the hvn and lvn.

when entering a high volume node, it's very likely price will spend some time in this area. I personally don't like the word "chop".

a low volume node is usually an area where price got rejected. either turned around or went right through.


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 torroray 
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tigertrader View Post
Undoubtedly one of the most ludicrous, recurring themes on this forum. It bears testament to the obsessive preoccupation with useless indicators and indicators in general. What's next, an indicator to tell you when your ass itches?


I think you can download it from the download section. The problem is sometimes the indicator didnt produce any signal but since your ass itches you click buy/sell

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 trendisyourfriend 
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What about if this soul is looking for a few clues he could use to develop an automated strategy? Ever seen an auto strategy that does not use indicator(s)? Maybe you should define what is a useless indicator as i see many in your own thread.


tigertrader View Post
Undoubtedly one of the most ludicrous, recurring themes on this forum. It bears testament to the obsessive preoccupation with useless indicators and indicators in general. What's next, an indicator to tell you when your ass itches? Try using common sense and your knowledge of price patterns, intraday seasonality, intermarket correlations, etc. instead of attempting to rely on some textbook cliche of an indicator or some other contrivance. Study the market(s) you are trading and learn it's nuances and tendencies and you'll know in advance when it's the best time to trade.


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 Rad4633 
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Silvester17 View Post
I like to look at a volume profile where you can see the hvn and lvn.

when entering a high volume node, it's very likely price will spend some time in this area. I personally don't like the word "chop".

a low volume node is usually an area where price got rejected. either turned around or went right through.


Can u link me to the MP indicator ur using, I just added Gomi but his has a different look from urs or am I mistaken? I try to search on futures.io (formerly BMT) I go into advance into platforms/indicators but I rarely find what Im looking for normal threads is no problem.
Thanks again
R

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 Fat Tails 
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tigertrader View Post
Undoubtedly one of the most ludicrous, recurring themes on this forum. It bears testament to the obsessive preoccupation with useless indicators and indicators in general. What's next, an indicator to tell you when your ass itches? Try using common sense and your knowledge of price patterns, intraday seasonality, intermarket correlations, etc. instead of attempting to rely on some textbook cliche of an indicator or some other contrivance. Study the market(s) you are trading and learn it's nuances and tendencies and you'll know in advance when it's the best time to trade.

But even if indicators are useless, it is more fun trading with some pretty colors, which will explain price action with hindsight and embellish your chart. Does n't this look convincing, and would not you have told you that price would have to hit these S/R lines prior to the start of the trading day?

There is a nice thread on random lines, which explains how a few horizontal lines may influence our brain.


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 Silvester17 
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Rad4633 View Post
Can u link me to the MP indicator ur using, I just added Gomi but his has a different look from urs or am I mistaken? I try to search on futures.io (formerly BMT) I go into advance into platforms/indicators but I rarely find what Im looking for normal threads is no problem.
Thanks again
R

sure no problem. here's the link:



I can't post the indicator here because of non-elite thread.

may I suggest to read the whole thread, because there're so many different ways you can use this indicator.

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 Eiji 
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tigertrader View Post
Undoubtedly one of the most ludicrous, recurring themes on this forum. It bears testament to the obsessive preoccupation with useless indicators and indicators in general. What's next, an indicator to tell you when your ass itches? Try using common sense and your knowledge of price patterns, intraday seasonality, intermarket correlations, etc. instead of attempting to rely on some textbook cliche of an indicator or some other contrivance. Study the market(s) you are trading and learn it's nuances and tendencies and you'll know in advance when it's the best time to trade.

So you are saying that a strategy based on indicators is doomed to failure?

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  #11 (permalink)
 tigertrader 
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The Pareto principle, states, that for many events roughly 80% of the effects come from 20% of the causes. This “law of the vital few” is rampantly evident in business and economics, and especially on this forum. This is not to say that the forum is not an important and invaluable tool in the retail trading community. The problem is not with the forum, but with how people use the forum. Big Mike does an incredible job bringing in legitimate experts to perform very informative and professional webinars. Yet, I don’t see any evidence of the fruits of his labors manifested in the posts on the forum. Easily, 80% of the “banter” disseminated by posters on futures.io (formerly BMT) is either mis-information, or of no utilitarian value, and serves no purpose other than to perpetuate the “retail mentality” that pervades this forum. At times it reminds me of the welfare system only with indicators replacing food stamps.

Of course, everybody on this forum is a retail trader, one might answer. That does not mean, however, that you have to think, act, and trade like one. The markets are complex, and the competition is sophisticated, so don’t think you can compete against the smartest minds using the best technology with a little trend line, a moving average, and textbook cliche. Don’t bring a knife to a gunfight, and expect to come out alive. Please pardon the hypocrisy and the use of the cliche, but most aspiring traders want a strict rule based system, that has a high degree of profitability, little to no risk, minimal capitalization, and no knowledge of the markets required. They want rules they can count upon to make money, now and forever. Wrong approach - retail way to think.

The problem with an overly simplistic trading plan that simply trades one market with one or 2 set-ups, is when volatility dries up in your market, you don’t have others to turn to. When your one or two set-ups stop working, you are back to square one, frantically searching to find others that will work. Because there is not a top-down or bottom-up perspective on markets, there is not a framework or an understanding on how to think about markets. Retail traders are always waiting for some indicator to tell them when to trade and what to do, instead of knowing what they are going to do if the market breaks, and what they are going to do if the market rallies.

They are more interested in being right the market, than in making money, forever placing the emphasis on trading percentage instead of optimal trade management. Or if the are talking about making money, it’s on how they are going to spend it, when they make it big. There is a very salient reason why most retail traders fail; the retail mentality’s approach, attitude, and methodology, is so prohibitive it almost guarantees a low probability of success.

One of my colleagues on the “Spec List” once wrote “It’s possible to train people to perform to a certain level in chess, but if this training does not promote self- education and a philosophical attitude, then the trainees will be little more than performing seals.” Professional traders are looking at the same markets and accessing the same information as retail traders, but they interpret the information differently and implement their ideas in unique ways.

Conversely, the herd mentality is alive and well in the retail world as traders flock to whatever indicator gets the most hits, and whatever mechanical system requires the least amount of edification and practice to “master”, while essentially remaining clueless about the markets, price action, correlations, trade management, etc. The end result is everybody looks at the same things and trades the same way, and we all know what happens when everybody is the same way in the market.. ort...ort.

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 tigertrader 
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Fat Tails View Post
But even if indicators are useless, it is more fun trading with some pretty colors, which will explain price action with hindsight and embellish your chart. Does n't this look convincing, and would not you have told you that price would have to hit these S/R lines prior to the start of the trading day?

There is a nice thread on random lines, which explains how a few horizontal lines may influence our brain.


Harry, my friend. Your indies are forever exempt from my criticism. They are like an oasis of utility in the otherwise desolate landscape of the mundane and secular. Quite frankly, I'd be lost without them. And yes, they are quite pretty, too!

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Eiji View Post
How can you tell if it will be a trending or choppy day?

Why are you concerned about such a thing? I can't think of the last time in years that I have ever needed something other than a chart with price on it to tell me if it is trending or choppy. And what does it matter. I am smart enough these days (experience) to not keep changing directions --- long, long, short, long, short, short, long --- and get killed in "chop". Once you stop changing directions so much, and you trade only at key price zones, then I can assure you that "avoiding chop" is really not even on your mind anymore.

I believe your stops are likely too small, you are trading too small of a chart, and you are just trading noise. A lot of people make this mistake. If you can't trade bigger charts, then it is because you are trading too big (size) and you need to stop trading full sized futures and look at micro's or spot forex, or 100 share ETF's, etc.

In short, the answer to your question is simply -- you are not asking the right question.

Just my opinion...

Mike

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 tigertrader 
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Eiji View Post
So you are saying that a strategy based on indicators is doomed to failure?




Not all indicators are created equal; some are very useful ( if used properly), many are worthless. Basing your strategy solely on indicators is a fools errand. It's analogous to rote memorization of material vs. comprehension of material. It is eventually going to catch up to you, and you will be totally unprepared.

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 Eiji 
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tigertrader View Post
The Pareto principle, states, that for many events roughly 80% of the effects come from 20% of the causes. This “law of the vital few” is rampantly evident in business and economics, and especially on this forum. This is not to say that the forum is not an important and invaluable tool in the retail trading community. The problem is not with the forum, but with how people use the forum. Big Mike does an incredible job bringing in legitimate experts to perform very informative and professional webinars. Yet, I don’t see any evidence of the fruits of his labors manifested in the posts on the forum. Easily, 80% of the “banter” disseminated by posters on futures.io (formerly BMT) is either mis-information, or of no utilitarian value, and serves no purpose other than to perpetuate the “retail mentality” that pervades this forum. At times it reminds me of the welfare system only with indicators replacing food stamps.

Of course, everybody on this forum is a retail trader, one might answer. That does not mean, however, that you have to think, act, and trade like one. The markets are not easy, and the competition is sophisticated, so don’t think you can compete against the smartest minds using the best technology with a little trend line, a moving average, and textbook cliche. Don’t bring a knife to a gunfight, and expect to come out alive. Please pardon the hypocrisy and the use of the cliche, but most aspiring traders want a strict rule based system, that has a high degree of profitability, little to no risk, minimal capitalization, nor knowledge of the markets required. They want rules they can count upon to make money, now and forever. Wrong approach - retail way to think.

The problem with an overly simplistic trading plan that simply trades one market with one or 2 set-ups, is when volatility dries up in your market, you don’t have others to turn to. When your one or two set-ups stop working, you are back to square one, frantically searching to find others that will work. Because there is not a top-down or bottom-up perspective on markets, there is not a framework or an understanding on how to think about markets. Retail traders are always waiting for some indicator to tell them when to trade and what to do, instead of knowing what they are going to do if the market breaks, and what they are going to do if the market rallies.

They are more interested in being right the market, than in making money, forever placing the emphasis on trading percentage instead of optimal trade management. Or if the are talking about making money, it’s on how they are going to spend it, when they make it big. There is a very salient reason why most retail traders fail; the retail mentality’s approach, attitude, and methodology, is so prohibitive it almost guarantees a low probability of success.

One of my colleagues on the “Spec List” once wrote “It’s possible to train people to perform to a certain level in chess, but if this training does not promote self- education and a philosophical attitude, then the trainees will be little more than performing seals.” Professional traders are looking at the same markets and accessing the same information as retail traders, but they interpret the information differently and implement their ideas in unique ways.

Conversely, the herd mentality is alive and well in the retail world as traders flock to whatever indicator gets the most hits, and whatever mechanical system requires the least amount of edification and practice to “master”, while essentially remaining clueless about the markets, price action, correlations, trade management, etc. The end result is everybody looks at the same things and trades the same way, and we all know what happens when everybody is the same way in the market.. ort...ort.

Tiger,

Tough pill to swallow, but I think you've got me pegged. I am a newb trader and with just a few months of market study and will continue until I find proficiency. Thanks for knocking me around a bit.

Much of what I have read on the markets states that the simpler the plan/strategy the better and to follow the rules of that strategy. I have read Murphy's Technical Analysis, Carter's Book, Douglas....What can I study to get a grasp on price action?

e

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 aligator 
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Eiji View Post
What can I study to get a grasp on price action?

This may sound harsh but it is not intended to be harsh. Think of learning price action and trading business this way. It takes at least 4 years for an engineering degree, ten years to become a doctor, and that is just to begin the new profession. Experience and time will help to actually put to work what you learned in school. Trading is the same, you become proficient after many years of study and hundreds or even thousands hours of watching price action.

So, read everything and learn the basic concepts of supply and demand, market structure, and really understand how and why a market behaves the way it does and you are on your way to an indicator free price action trading approach. The short answer is informed screen time.

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tigertrader View Post
(...)
Of course, everybody on this forum is a retail trader, one might answer. That does not mean, however, that you have to think, act, and trade like one. The markets are complex, and the competition is sophisticated, so don’t think you can compete against the smartest minds using the best technology with a little trend line, a moving average, and textbook cliche. Don’t bring a knife to a gunfight, and expect to come out alive.
(...)


tigertrader View Post
Not all indicators are created equal; some are very useful ( if used properly), many are worthless. Basing your strategy solely on indicators is a fools errand. It's analogous to rote memorization of material vs. comprehension of material. It is eventually going to catch up to you, and you will be totally unprepared.

Thanks for these good points TigerTrader. I have yet to find an 'cliche indicator' that works "as advertised" so I'm inclined to agree with you here.

However, some indicator to filter potential price action setups will probably still be needed. Can you mention some of the more "good", useful and "professional" indicators TigerTrader? Don't get me wrong, I'm not asking for a magic or profitable indicator, but an example from what experienced traders consider a good and professional indicator would be helpful. Would this be a complex mathematical indicator, or a rudimentary indicator based on a complex idea, or is it more the interpretation of a custom indicator that would make it "professional"? Or is it an basic standard indicator that gets "professional" through the discretionary decisions of the experienced trader?

That would make it concrete how we as beginners can escape the 'retail mentality'. Who can give an example of professionalism with retail trading?

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tigertrader View Post
One of my colleagues on the “Spec List” once wrote

“Spec List” ?

Math. A gateway drug to reality.
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“Spec List” ?

Niederhoffer refers to his list of contacts and contributors as the "Spec List" (see for example here). Though there probably more kind of "spec lists".

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 Eiji 
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torroray View Post
I think you can download it from the download section. The problem is sometimes the indicator didnt produce any signal but since your ass itches you click buy/sell


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 tigertrader 
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torroray View Post
I think you can download it from the download section. The problem is sometimes the indicator didnt produce any signal but since your ass itches you click buy/sell



ROFSMAO !!! (rolling on floor scratching my ass off)

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 squeezed 
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I have done the biggest damage to my trading account in choppy markets. they are my weakest link.
My rule is: I simply do not take any new trades until ADX gives a reading of 30 or higher. no exceptions. this rule has been serving me well. i don't think you need to configure a special indicator for ADX, just check the level. if its reads under 30 the move can't be that significant

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 squeezed 
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i was looking at your original example picture thumbnail. the ADX would have triggered late at 10900 rather than your sell point at 19600. so you would have missed some ticks even if you sold the retracement at 10920. but once that 30 registers a hit I am "tuned in" to a trending market and you can make your own decision when to exit. there is no perfect system or indicator but that is my rule if i am having trouble with choppy behavior. by the way, this chart doesn't really look very choppy at all...

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 indextrader7 
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I think Big Mike hit it on the head about just looking at a chart with price plotted on it. Here's my spin on that:

First off, I don't think it's our job to PREDICT what the day will bring (uptrend, downtrend, choppy, etc). It's our job to analyze, and be in the moment/in the zone with the market to see what unfolds on the right edge of the chart.

I like to simply watch swing high's and swing low's on my main trading timeframe chart and see what the market is TELLING ME right now. Are we trending up? Well then that's what I expect to continue until A) we quit making higher highs and higher lows, or B) we enter an area (as seen on a longer timeframe) that shows previous resistance, but even then it's just an area to be aware of and REACT to how price behaves around it. So we're still in the moment with the market, not predicting.

You don't need to know what's going to happen next in order to profit.

Hope this adds some value somewhere!

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  #25 (permalink)
 sandman 
San Antonio, Texas
 
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Interesting thread. I'd consider myself intermediate in experience, neither newby nor wizard, but thought I'd contribute my 2 cents.

First, chop versus trend is neither inherently good nor bad. There are methods that work well for making money in either market. And a versatile trader needs to be capable of handling either one. Markets are choppy more than trending, so if you can't deal with a choppy market you're missing out big. If you use methods for choppy markets in trending ones, or vice versa, you're in for losses. And when the markets hand you a bunch of lemons, you just have to be ready to make lemonade.

Indicator based approaches aren't inherently bad. I do have some trouble with the first post in the thread using a bunch of different indicators in a single timeframe however as a sole decision making rationale. Such complexity does not lend itself well toward pulling the trigger at the appropriate time with confidence. On the other hand, a moving average in a higher timeframe can, for example give you clarity on market direction and sharpen a signal in the lower, as one example. But invariably with 5 indicators, you'll wind up with 3 saying to go one way & 2 the other. So with a string of losers, do you add #6 and after that #7?!

You just have to decide quickly whether a market is choppy or trending so you can use an appropriate model. If you're using trending methods & find yourself in a choppy market, you'll likely hurt yourself before you figure it out. If you endure a couple consecutive losses, best to reexamine conditions and perhaps stop trading that method. Myself, I like to look at trade volumes in the early going on the ES. If you are consistently spiking above 25K contracts every 5 minutes in the early 30 minutes or so of RTH, expect a trending sort of day. That's not to say you won't have chop within the trending day. The lunch hour is notorious for that. And sometimes those trends change in the middle. We've seen much of that lately. Conversely, if trade volumes are low early in the day, expect choppy conditions. You need to frequently reexamine things as things go & be flexible. I find charts of $tick, $trin, and $vix intraday invaluable in that regard, for trends versus the open. The currency pair AUD/JPY is also useful for a look at the carry trade & so-called risk-on/risk-off nature of things.

So, no flames from the "wizards" in the crowd or about the 9,999 hours I have left staring at a screen before I enter market nirvana. This question posed by an obvious newby is a really, really good one as is the subsequent thread.

Sandman.

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  #26 (permalink)
 squeezed 
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squeezed View Post
I have done the biggest damage to my trading account in choppy markets. they are my weakest link.
My rule is: I simply do not take any new trades until ADX gives a reading of 30 or higher. no exceptions. this rule has been serving me well. i don't think you need to configure a special indicator for ADX, just check the level. if its reads under 30 the move can't be that significant

I should have been more specific with this.

I was using the 5min chart for intraday trading with this method.

Since posting this I have since gotten much better through experience, evaluating time frames, feel and patience .


If I am flat once the ADX 30 is triggered, I will fade the first back test to the 5min 20ema. which the name is ironically called the "holy grail" set up developed by Linda Raschke Linda Bradford Raschke - LBR Group

She writes:

"What is a "Grail" Trade?

The "Holy Grail" trade was originally described in my Street Smarts book. The setup occurs when the market's trend has been strong enough to cause a 14-period ADX to rise above 30. When the price then retraces back to the 20-period EMA, odds favor a retest of the most recently formed high or low. "



I still conclude the ADX still shows "impulse" moment which differentiates quiet, choppy markets from moving active ones

"I have two basic rules about winning in trading as well as in life: (1) If you don't bet you can't win. (2) if you lose all your chips, you can't bet."
--- Larry Hite from Market Wizards by Jack D. Schwager
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  #27 (permalink)
 Fat Tails 
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Salt water crocodiles are amongst the larger crocodiles. That crocodile experienced a choppy day, when a shark took off its right front leg.

If there are too many sharks, it is best to stay out of the water. Now the crocodile

- did not know that the shark would come and take off its leg
- had to stay in the water for finding food
- did not have the choice to leave the water, because it was a crocodile

If you want to survive you need to take risks. The best protection against a choppy day is a stop loss and a daily loss limit. Usually you won't see the sharks coming.


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  #28 (permalink)
 vvhg 
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Fat Tails View Post
Usually you won't see the sharks coming.


Same applies to fat tails as seen on @Fat Tails avatar. You only see the fat tail once it has passed you:


vvhg

Hic Rhodos, hic salta.
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  #29 (permalink)
bjulian
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My general observation after 12 years of full time trading the SP500 instruments is that it may trend 1 day out of 4-5. Therefore, as a swing trader, If the SP is in a bullish trend as defined by IBD I look to buy pullbacks at intraday support areas AFTER a trend day. I will exit a partial position at last swing high anticipating that price will make a higher high.

Many times though price will consolidate for 2-4 days before continuing its trend. If it retests intraday support I buy back the half position I sold and sell it on the next test of swing high.

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  #30 (permalink)
 ElChacal 
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I am throwing in the towel on indicators. I got tired of backtesting in search for the holy grail. I don't think is possible to have a strategy that performs well in trendy AND sideways conditions. You cannot get the nervous (fast response) required for sideways working with the robust (noise filtered version) required for trends in one indicator, and if it works in a set of "cycles" it won't work on the rest of instruments with different "cycles".

I have tried filters, momentum, RSI, TRIX, MACD, my own filtered and normalized versions of price "data", angles, you name it.

I am currently "Market Replaying" only and looking for reversals on (what I consider to be) S/R horizontal lines. If I start being successful and understanding the markets better I might go live.

BTW, great thread!

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  #31 (permalink)
 Big Mike 
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carlosavellan View Post
I am throwing in the towel on indicators. I got tired of backtesting in search for the holy grail. I don't think is possible to have a strategy that performs well in trendy AND sideways conditions.

While I agree on getting rid of what people would describe as 'typical indicators' (price derived indicators of the same source instrument), I disagree on it being impossible to have a strategy that works in trend and "sideways". Simply extend the horizon and holding period to trade multiple days at a time, with a scaling in and scale out strategy.

Mike

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  #32 (permalink)
 cory 
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carlosavellan View Post
I am throwing in the towel on indicators. I got tired of backtesting in search for the holy grail. I don't think is possible to have a strategy that performs well in trendy AND sideways conditions. You cannot get the nervous (fast response) required for sideways working with the robust (noise filtered version) required for trends in one indicator, and if it works in a set of "cycles" it won't work on the rest of instruments with different "cycles".

I have tried filters, momentum, RSI, TRIX, MACD, my own filtered and normalized versions of price "data", angles, you name it.

I am currently "Market Replaying" only and looking for reversals on (what I consider to be) S/R horizontal lines. If I start being successful and understanding the markets better I might go live.

BTW, great thread!

or you could save the time you spend on backtesting by reading this post

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  #33 (permalink)
 ElChacal 
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Big Mike View Post
While I agree on getting rid of what people would describe as 'typical indicators' (price derived indicators of the same source instrument), I disagree on it being impossible to have a strategy that works in trend and "sideways". Simply extend the horizon and holding period to trade multiple days at a time, with a scaling in and scale out strategy.

Mike

I am not sure I follow on the horizon and holding period. My "bots" that perform well only do on daily charts and on certain instruments. For instance, reversals are good on GC and bad on YM/ES. MA's are good on YM/ES and bad on GC. I guess mixing the two works but it is no holy grail.

What I mean (and in agreement with previous posts here) is that I haven't been able to find an automated strategy that performs on every instrument, and if I find something close I take a trade every leap year. LOL.

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  #34 (permalink)
wmwmw
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I read a couple of online trading forums and found for daytrading index futures traders are actually scalping.
All the so called"trend following" systems are not really about trend. The systems based on intraday EMA are actually following price moves, not following trend.
A person walk along a direction and his dog run around him,sometimes at same direction sometimes at opposite direction.
The person's way is called trend.
The dog's way is called price moves.
You follow person's way you have high probability.
You follow dog's way you have low probability because dog's direction is random.
So a market trend is mostly decided before the day begins on daily chart.

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  #35 (permalink)
 ElChacal 
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wmwmw View Post
I read a couple of online trading forums and found for daytrading index futures traders are actually scalping.
All the so called"trend following" systems are not really about trend. The systems based on intraday EMA are actually following price moves, not following trend.
A person walk along a direction and his dog run around him,sometimes at same direction sometimes at opposite direction.
The person's way is called trend.
The dog's way is called price moves.
You follow person's way you have high probability.
You follow dog's way you have low probability because dog's direction is random.
So a market trend is mostly decided before the day begins on daily chart.

Nice comparison, but I am focusing on the dog now because the owner gets whipsawed on a consistent basis.

@wmwmw what are you using to follow the trend on daily charts? Are you using filters as proxy? How does it perform on an instrument such as CL? I have not found a trend following strategy that I can rely on, not yet...

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  #36 (permalink)
wmwmw
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carlosavellan View Post
Nice comparison, but I am focusing on the dog now because the owner gets whipsawed on a consistent basis.

@wmwmw what are you using to follow the trend on daily charts? Are you using filters as proxy? How does it perform on an instrument such as CL? I have not found a trend following strategy that I can rely on, not yet...

I don't use any indicators.
Just a simple daily chart, which is more than enough to tell a trend.

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  #37 (permalink)
 Underexposed 
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tigertrader View Post
Not all indicators are created equal; some are very useful ( if used properly), many are worthless. Basing your strategy solely on indicators is a fools errand. It's analogous to rote memorization of material vs. comprehension of material. It is eventually going to catch up to you, and you will be totally unprepared.

I know this is a type of trading that I do not do... but to say all indicators are useless and that all are created equal is not true. I am glad to see you say this.

It takes a long time to understand how indicators work. I find that most people who use indicators have no clue how to apply them. By that I mean taking conventional indicator buy/sell signals at face value and shrugging when they does seem to work.

Take ADX by itself... I see many people using this as a trending indicator....which it is not!! This indicator shows the STRENGTH of the current trend...not the trend itself. So if the ADX(30) is rising above 25, whatever the current trend is Bullish or Bearish, it is getting stronger... personally I don't like this indicator as it is severely smoothed and I don't find it particularly useful...However the DMI+/- from which the ADX is calculated is excellent

I use a lot of indicators in my equity trading. I don't focus on one particular indicator at the exclusion of others. All indicators give false information at one time or another but if you develop a suite of indicators that do not perform alike (eg. MACD and TRIX though calculated differently essentially plot the same) you can reach a consensus from the TRENDING of each indicator (so many people focus on the number itself) and arrive at a decent conclusion.

I really wonder how you can apply indicators that were really designed for continuous data charts, then use them on Tick charts and expect the conclusions to be the same. I am certainly not an expert on Tick charts but that does not seem reasonable to me.

I don't subscribe to every indicator under the sun...many are crap and many of the good ones out there are not described properly. It takes time to understand how they really work... also some that work fine in daily trading where there is usually good continuous data are crap in intraday trading in illiquid situations.

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  #38 (permalink)
BestBrokerDeals
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What you're talking about here is intraday market-typing.

Firstly, you can't know anything for certain, so you're going to have to work with probabilistic outcomes and accept that you'll often be wrong.

There are two ways we can approach this . . .

METHOD ONE

Your underlying concept here is to assume that because past futures have resembled past past, future futures will. In other words, we anticipate auto-correlation. We expect that the future state of affairs will mirror the current state of affairs.

Track the range expansion as the session develops and extrapolate this to predict the range for the full session. So, if you're using one minute bars and you know that there are 360 of them in a session (there aren't!), then at any time you could calculate:

Predicted Daily Range = ( Current Range / Bar Count ) * 360

You're basically calculating how much each new bar is contributing to the daily range expansion and then extrapolating.

Keep in mind that even though this might predict the daily range with absolute accuracy, it isn't telling you anything about how that range will form. Maybe the market drifts steadily lower for the entire session, with the high at the open and the low at the close, or maybe the daily high and low are in place within the first 30 mins of trading.

Want to get more advanced?

Then you need to discount (i.e. normalize) for time of day. This means collecting a lot of data. Each 1 minute range is then normalized against the average range for that particular one minute bar each day. If you don't do this, then your predicted daily range will wildly overshoot at the start of each session - the additional volatility that is usual in the first few minutes of trading will have an overwhelming weight on predicted range well into the session.

METHOD TWO

Your underlying concept here is to assume that all things are mean reverting. The market's choppy now? Then a trend is sure to follow. There's a nice directional move unfolding? Then things are sure to become range-bound sometime soon.

You need a measure of "trendiness", and I'm not talking about some over-precessed indicator such as the ADX - something as simple as a percentage of consecutive up/down closes will do - and then you assume that this measure will revert to it's mean.

One way to do this is to take a measure of the range, make it directional, and then apply bollinger bands to this. Whenever your measure is below the average and heading towards the lower band then you anticipate a reversion to the mean.

WHICH METHOD TO USE?

That's up to you! My belief is that you need to take a "philosophical" stance on market behavior and then use your strategy to back this up.

Maybe neither approach is sufficiently nuanced?

Perhaps you need to use Neural Networks to recognize the patterns that characterize different market types?

I hope that my answer helps, and at least gets you thinking about objective ways to approach this problem. Most of all, successful trading is about problem solving, and you have gone far enough to define a problem - now you just need to find a solution for your strategy.

Kind regards,

Nick

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  #39 (permalink)
 ElChacal 
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Big Mike View Post
While I agree on getting rid of what people would describe as 'typical indicators' (price derived indicators of the same source instrument), I disagree on it being impossible to have a strategy that works in trend and "sideways". Simply extend the horizon and holding period to trade multiple days at a time, with a scaling in and scale out strategy.

Mike

Thanks @Big Mike . After further research, what I am seeing is that Cycle length (or holding time), PF, %Win, Max. Drawdown seem to be all related. It is like one of those "You can only pick 2" .

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 Itchymoku 
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The most popular method is to use a few moving averages equidistant from each other like a 100 ema, 200 ema, and 300 ema. When they they tangle the market is chopping; when they run free of tangle the market is trending. Then you'll need to set a variable of how much time transpires after the last intersection before declaring it trending again. You'll need to fiddle around with these parameters to get it right.

R.I.P. Joseph Bach (Itchymoku), 1987-2018.
Please visit this thread for more information.
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