See, When I first started trading SIM I felt a feeling of intuition that perhaps certain traders took predestined days off and then they stepped in on other days. I noticed how the market acted wildly different from one day to the other and usually continued the same behavior throughout most of the day. Now I see that idea as being somewhat preposterous because I can look at the market from a larger perspective with other factors included. I know now that nothing is predestined, but perhaps it just looks that way due to certain trader's aversion. It's hard to get a straight answer because people who post generally discredit any intuitions on grounds of ambiguity and those who've been doing it for a while, like you've said, aren't necessarily inclined to elaborate.
One other thing - if you're going to trade 'chop' (narrow range trading), I am always much better off only trading in one direction, which for me, is long if the hourly trend is up (or sitting on hands if it is clearly down). If I try and trade both long and short than that usually implies that my stops are too tight for me and I have a chance to lose in both directions, which is really unpleasant.
By decreasing chart interval (zooming in) you can turn any chop into a trend - or at least a channel. Whether it's tradeable or not depends on your skill (read: is that in your trading plan).
What looks like chop on a 5 minute chart may look like a beautiful channel on a 5 second chart. But the problem is that smaller intervals lose the predictability/probability of larger intervals. So if you're not prepared for (i.e. if it's not in your trading plan) the unpredictability of the smaller timeframe you're going to get hosed.
And of course the other risk of trading smaller intervals is that commissions, because they're static, become a larger percentage of your profitability equation.
I've been looking for ways to size up the market before trading. It's so obvious (in hindsight) that there are times and days that don't work for my strategy. The challenge is how to identify them before the 3 consecutive losses do it for me. Some people use opening range. I'm looking for earlier signs, since the best moves can be made during opening range. I've been looking at cumulative volume and ATR.
Last edited by jacqudy; August 19th, 2012 at 11:07 AM.
This post has been selected as an answer to the original posters question
On man's chop is another man's treasure, I am more profitable on choppy days then on trending days. Guess what? it was by design, given that the markets spend more time ranging then trending, I know I would have many more opportunities daily. I'd rather have singles all week long, then wait all week praying for that one trend day, then be under the gun to squeeze every penny out that trend.
The following user says Thank You to monpere for this post:
Don't you trade continuations as well? With all common logic I'd say range based trading is a lot more difficult. I'd assume with the amount of experience you've had you'd be equally good with both. What is the indicator that you primarily use for divergences based off of?
My system is based off of continuation rather than fading. The system works okay on chop, but works like its on steroids during a rally or massive trend which sparked this whole topic. I mainly trade Divergences generally in the direction of the trend or counter move. I'm just not that great at anticipating the counter move, but like to trade it sometimes after it happens.