S&P 500 Sideways movements

Hi all,

I have a system that i'm using which works ok when the market is going up or down, but it loses money when it goes sideways and usually quiet a lot, what i need is some indicator which tell's me that the market is looking like it may be a sideways kinda day. Can anyone help me with this please.

Does anyone know how often (previously) you would expect to see sideways day movements. Is it a regular thing or is it more so normal to have an up day and a down day.

Any advice much appreciated.


I have two graphs which shows sideways movement with 1 graph showing high volatility (i'll add them when I find out how too).

Kind Regards
Mike

charts attached,i think!

mike_g4 said:

Hi all,

I have a system that i'm using which works ok when the market is going up or down, but it loses money when it goes sideways and usually quiet a lot, what i need is some indicator which tell's me that the market is looking like it may be a sideways kinda day. Can anyone help me with this please.

Does anyone know how often (previously) you would expect to see sideways day movements. Is it a regular thing or is it more so normal to have an up day and a down day.

Any advice much appreciated.


I have two graphs which shows sideways movement with 1 graph showing high volatility (i'll add them when I find out how too).

Kind Regards
Mike

Click to expand...

Most of the time markets spend their time in ranging mode. Although this obviously differs from market to market and cycle to cycle, in my experience trending days occur around 30% of the time.

firewalker99, what do you mean by trending days? or ranging mode, would you be able to elaberate a little for me.

thanks
mike

mike_g4 said:

firewalker99, what do you mean by trending days? or ranging mode, would you be able to elaberate a little for me.

thanks
mike

Click to expand...

Roughly, there are two types of days. Once were price continues to trend in the same direction during most of the day (see left chart), and ranging days where price seems to be stuck between two price areas (right chart).

These are charts from two days from November 2007 on the DJIA. These are very good examples, but they don't always come across that nice. Sometimes what looks like a trend day might reverse seemingly all of a sudden, or what looks like a range day might break out and set off to continue higher for the rest of the day.

Jim Dalton said "...the trend is clearly not your frined" when his analysis showed that markets tend to be range bound or 'bracketed' about 70% of the time.

Thanks,

During the Range days my system works ok if they are big swings. The attached graph on the left shows a day where my system lost money due to the trend changing in to a choppy range day. My system makes money the longer the trend continues or on the big swings in range days.

The graph on the right shows where my system works well.

Can you offer any advice on these two graphs and what you think of the how system is working on these types of days.

Do you think a system that makes money on trend days the 30% of the time can outperform the losses in the 70%. This is basically what my system is doing, I'm trying to minimise my losses on the range days if I can by speaking to people on here and finding out a little more on how to detect if it's going to be a range day or not and if so by what range I have to work with.

much appreciated.

Mike

mike_g4 said:

Thanks,

During the Range days my system works ok if they are big swings. The attached graph on the left shows a day where my system lost money due to the trend changing in to a choppy range day. My system makes money the longer the trend continues or on the big swings in range days.

The graph on the right shows where my system works well.

Can you offer any advice on these two graphs and what you think of the how system is working on these types of days.

Do you think a system that makes money on trend days the 30% of the time can outperform the losses in the 70%. This is basically what my system is doing, I'm trying to minimise my losses on the range days if I can by speaking to people on here and finding out a little more on how to detect if it's going to be a range day or not and if so by what range I have to work with.

much appreciated.

Mike

Click to expand...

You could minimise the losses by not trading at all on ranging days. Obviously that would require you to know in advance which day it's going to be. That would be nice, but reality isn't so easy.

There are some related threads, perhaps those who are interested in the matter can be of more help there:

All about trendlines

Trend Again

Trending or not

ranging trending market test

firewalker99 said:

You could minimise the losses by not trading at all on ranging days. Obviously that would require you to know in advance which day it's going to be. That would be nice, but reality isn't so easy.

There are some related threads, perhaps those who are interested in the matter can be of more help there:

All about trendlines

Trend Again

Trending or not

ranging trending market test

Click to expand...

If you consider that on some days price will remain "stuck" between two "boundaries", you might expect price to release some energy when it finally breaks free of those boundaries. This is only one example where the probabilities favour a trending day where price continues in one and the same direction.

firewalker99 said:

There are some related threads, perhaps those who are interested in the matter can be of more help there:

All about trendlines

Click to expand...

That was a pretty good thread. I'd forgotten all about it. And only 60 posts, too . . .

dbphoenix said:

That was a pretty good thread. I'd forgotten all about it. And only 60 posts, too . . .

Click to expand...

Lots of decent threads hidden in the dungeons of t2w... digging them up is one thing, trying to persuade people to have a look instead of starting new threads another. But I'm lobbying as you will have noticed

thanks for the info, i'll have a read later...

Not trying to start anything, but if all those lines and indicators and so forth on your chart aren't helping you, why not get rid of them?

dbphoenix said:

Not trying to start anything, but if all those lines and indicators and so forth on your chart aren't helping you, why not get rid of them?

Click to expand...

The lines do help. The main line green/red. the light brown lines show minor movements and help with range periods, the purple lines are helpful in non volatile periods of the day and the moving averages and indicators below are trand reversal and overbought over sold indicators along with historic volatility.

Come to think of it I don't tend to trade that much on low volatility periods so I can remove the purple maybe. I could remove the moving averages but I like to see them.

I'm not sure if these are all the best way of trying to read the market but this is what I have come to learn and use and develope a system of mine.

It does have some issues I'm trying to tweak to make if better.

I would like to know if I can use something which would tell me when we are entering a range period and about to leave the range period (enter trend) My system only works well when trending, if loses money when in range periods.

Anyone thoughts on determing the above, this would help minimise my losses on range days.

thanks all

Mike

Mike, everybody's system does well in trending markets, unless they can't tell up from down (and this is a common shortcoming). As for the ranging markets, you say you're having trouble trading them, but you also say that all those lines and indicators help you. If they help you, I don't see the problem. If they don't, then why have them?

The challenge is not to determine in advance what kind of day you're going to have but to determine what kind of day you're having. Can all those lines and indicators help you do that?

I find that it's more difficult or at least I haven't found any way of making money on range days with my indicator setups but it does make money on trend days, Good buy, sell signals.

Thanks for your post's