I know this topic has been touched on within various threads but I thought I'd give it it's own spot. Was just curious what people use to identify range bound chop markets?
I've grown accustomed to using TICK, delta and s/r levels on the ES but am real curious what indicators out there people have had success with that could be applied to instruments such as the 6E.
Blz
Can you help answer these questions from other members on futures io?
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It's interesting, isn't it, how two different people can have different views.
I completely understand exactly where Blz17 is coming from. For a long time, I couldn't see chop.
And I also completely understand where sam028 is coming from. Now, I can see chop so easily, I don't need an indicator to tell me anything.
We have both types of traders here on futures.io (formerly BMT), so absolutely this is a worthwhile discussion to have and you should continue.
One of the most frequently used descriptions for chop is "Chop is when the Bollinger Bands are inside the Keltner Channel". A lot of squeeze indicators use this as a basis of their logic.
Hi Blz,
for the 6E, or maybe basicly for the currencies, i think it is not that easy like in ES or FESX to identify chop in small timeframes.
i think for 6E you have to search the chop in 15/30/60 min charts or so, and then its heavy with having good stops if you trade futures instead of forex - you need a big account.
i started several trys to work with 6E the last years - always throw the stuff in the corner - cause its the indicees+ the small timeframes that i really understand and not the currencies.
That is a nice shot. I second Max's question. Could you also post screen shot of the setting used for that appearance on the ECO2. Thanks. Good trading.
Thanks a bunch sukhsan. Mine comes out slightly different but it seems to be when the lines get real tight together mine are crossing a bit whereas yours weren't. If you got any ideas on why that is I'd love to hear it. Regardless, I should be able to tweak the settings on what I got here. Thanks again. Seems to identify chop zones very efficiently.
P.S. I tried to match my screenshot as closely as possible to the same time period as yours.
Hahahahaha. I'm such a bonehead. I thought I had adjusted for the PST to EST. Little did I realize that my chart was showing 2 days not 1. I need to get more sleep. Thanks again SSS.
Check post #18 on page 2 u will see the parameters
3rd panel is ECO 7,4,21 in plots fading with 80 width and style as Hash all other transparent and squeeze the panel
4th panel is 20-20 zero lag DMA instead if line with big size width and Hash and squeeze
Could you please bring up indication/signal on the chart ( up or down arrow), when signal line cross below or up ECO2 line. I know it is out of way, if you could, it will be great.
There is an indicator called "ATRRatio" which you can place at the bottom of your chart as a visual filter. Red means there is not enough volatility in the price to trade, green means there is. You can also use it in a Strategy to filter entries where ATRRatio>1 must be true before entering a trade.
If you look at a 5 min ES chart with the default settings for ATRRatio, you will see it generally only lets you enter during the first few hours of European trading, then the US market open up until about 11:00 am, then the afternoon session after about 2pm... which makes sense.
Good luck!
The following 4 users say Thank You to MXASJ for this post:
mxasj thanks i will look at that and see if i can use it in my charts somehow will let you know what i think after a couple of days playing with it...sharky
Also try it with a 4 Range chart on the ES. Got a long signal at 7:56 EST on the 4 Range that I didn't get on the 5 min. That trade would have worked out.
Side-by-side ATRRatio (bottom panel of the charts) with ES 5min and ES 4Range after the European open. Note sure how useful that indicator is on a range chart, at least with the default settings.
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Not very, according to those screen shots lol! Like everything I am sure it can be tweaked some, but without looking at the logic --- the issue with ATR is that a 4 range bar will always have an ATR of 4 ticks... whereas a minute bar, volume bar, tick bar, etc --- the range varies. So, it will depend on how its logic is built.
Also, could you upload this to the Downloads/File Sharing section?
Not sure if you guys have seen this one or not. I downloaded it a few days ago, but haven't had time to try it yet. Definitely has a cool name though....
Here you go sharky... I think the idea is that you take long trades when the green line is above the blue. These are just the default settings though, so maybe it can be tuned better.
EDIT: Actually, after reading the info on it, I think the green above the blue means it's ok to trade long/short, otherwise it's chop and stay away...
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This is the Williams %R indicator with JayMA smoothing. Williams %R is a momentum indicator designed to identify overbought and oversold areas.
By adding JayMA smoothing, we have a quick yet smooth version of this popular indicator.
COMPATIBILITY:
NinjaTrader …
BLZ, $TICK inside +/- 800, ie not hitting extremes, or even distribution of # of times it has hit extremes. And SPX failure to break previous days high or low
The following user says Thank You to tortexal for this post:
it's is most definitely an interesting topic. i personally see the need for a good chop indicator if you are trading in a purely systematic manner. while it is easy to eyeball a chart and see chop, i am still trying to find a suitable chop indicator for a systematic strategy.
i have tried the kaufman efficiency ratio, the keltner SNR, vhf, and am tinkering with the damiani volatmeter. i tend to look at daily (not intraday) data....any thoughts?
have any of you tried teh damiani volatmeter? any ideas for good settings for daily charts?
ADX is a very good chop identifier, < 20 means choppy and stay away. ATR is good voliatity indicator which can also sometime tell you if it is range or trend
I use volume as a basis to identify chop... when markets are trading slowly, it is more likely than not that you will be in chop. If trades are occurring quickly, it is more likely than not that you are seeing a trend. So when you see trading start to speed up, be prepared for trending movement.
very good, no vol no go. I know PA guys are going to say 'hogwash' but lets ignore that and go back to the volume, here is a proof without even looking at price you know when its going to chop.
1. At what point, real time, do you know you are in chop based on volume?
2. Once you realize this, do you ignore all price action / everything else, and wait to trade?
3. At what point do you know you are no longer in chop and 'safe' to take another signal?
4. What time frame and instrument are you looking at in this screenshot?
Thanks,
Gary
The following user says Thank You to Gary for this post:
1) when vol goes below certain level, a horiz line is placed at that level for easy reference.
2) you switch mode from trend to range mode
3) when vol goes above the horz line
4) es 5m.
if you are proficiency in excel, load up 5m data for a month or two do a study on a range of bar vs its volume you will arrive of a conclusion more vol = more range
ps. this doesnt hold true for cl its vol is relative hight most of time.
Thank you for your reply; I have yet to find any good use for volume when trading CL. I think some can find uses for it, after the fact, but, nothing consistent.
Enjoy the rest of your weekend,
Gary
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To identify a range bound market, one of the best indicators I've found is the Average Directional Index. For intraday time frames use a 14-18 period. Overlay with the Directional Movement Index (DMI) as well using the same period. When the ADX is below both the DMI positive and DMI negative, you are definately in a flat market or range bound territory. Another criteria is an ADX reading below 15. This signifies a weak trend reading. For Daily charts a 10-14 period ADX should suffice. The best teacher on ADX is Chuck LeBeau who is now retired. Google him and find anything you can on what he's written on the subject.
Tip: It is critical that in a range bound market, you do not use trend following indicators---you will lose a lot of money being chopped around. You MUST move to an oscillator based indicators, stochastics, %R, etc... and navigate the trade using these indicators and you will do much better. Also, limit your upside profit target, range bound markets also have range bound profit targets-- 1-1.5 ATRs at most.
The following user says Thank You to veigaman for this post:
Take a look at attached pictures. You can often see when price is spiking, trying to rise or even attemting to go lower but the cumalative delta for the day is not following suit. They are either accumalating to mark up prices or distributing to accumalate at lower prices (significant in an uptrend market) to push price higher, usually identified by sideways activity. The cumalative delta can help to see if price is moving with them attemting to move price lower or higher. Chop is around is delta between +/- 10K or even +/- 5K
Trying to find the Damiani Vol meter indicator that someone had on this thread. THe links are dead. Has it been removed? I cant seem to find it. Need to try some indicators to remove chop...its killing my system
in my short trading experience i had too detected this phenomenon by myself.
people can be taught and instructed to hunt for breakouts / breakdowns and then the patterns rarely hold and you end up losing money if you follow the instructions strictly.
let's say a stock is ever closer to breaking below a significant support. it is ever closer to breaching, let's say 60, it is displaying consolidation, edging closer and finally it breaks below. novices and beginners would pounce selling short of the stock before or right at the start of the potential breakdown but a lot of times they end up scalped. price will only fall some cents below the resistance and with a mass of novices riding short it will oftentimes reverse and go back 20 cents or so above 60. this puts massive pressure on those who shorted the stock in anticipation and as they are also taught, a lot of novices will cut their losses but take a loss indeed. 30 or 40 minutes later, the stock will be back below 60 and significantly so.
the solution to this i saw in a youtube video, and it asked to always hold until the 2nd breach. 2nd breach of a support or resistance, 2nd time breaches moving averages in the opposite direction, 2nd regression of price to the moving averages during a trend, etc.
this cumulative delta indicator seems to highlight the same dangers and should be very beneficial. will further research on the concept and check the indicator out if it a version is available for tradestation.
On the July 9, 2009 there was a thumbnail posted the Eco2New graph which has the indicators on the imput series in other words right on the candles. I was looking for that actual indicator to download, I have the EcoNew2 White Fading Only but that has the indicators all on the bottom of the chart and I have the Eco2New Sharky Pack which is also on the bottom of chart.
Thanx,
Harr
I thought I had adjusted for the PST to EST. Little did I realize that my chart was showing 2 days not 1. I need to get more sleep. Thanks again SSS.
whereas a minute bar, volume bar, tick bar, etc --- the range varies. So, it will depend on how its logic is built.
