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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?

  #21 (permalink)
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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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  #22 (permalink)
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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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  #23 (permalink)
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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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  #24 (permalink)
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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)
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My 2 cents for what it's worth

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.


Last edited by sandman; May 20th, 2012 at 05:16 PM.
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  #26 (permalink)
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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

Last edited by squeezed; September 26th, 2012 at 08:48 PM. Reason: grammar
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  #27 (permalink)
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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)
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Usually you won't see the sharks coming.


Same applies to fat tails as seen on @
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vvhg

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  #29 (permalink)
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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)
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Throwing in the towel on indicators


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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