Any good indicators or techniques to avoid chop?

[forexsniper]

Does anyone know of a good indicator or technique which can help minimise getting into choppy trades - ie where the market is chopping within a range?

I'm using a set of trending indicators and they work well when the markets are trending, but during periods of chop, it just kills me and often wipes all my profits.

I'm trading in the 1H timeframe. One technique I've heard of is having a 20expMA and a 30expMA on the chart and looking for the distance between these lines to help determine chances of chop.

Does anyone else use any other indicators or techniques to help avoid chop?

 

[jiggly]

Does anyone know of a good indicator or technique which can help minimise getting into choppy trades - ie where the market is chopping within a range?

I'm using a set of trending indicators and they work well when the markets are trending, but during periods of chop, it just kills me and often wipes all my profits.

I'm trading in the 1H timeframe. One technique I've heard of is having a 20expMA and a 30expMA on the chart and looking for the distance between these lines to help determine chances of chop.

Does anyone else use any other indicators or techniques to help avoid chop?

place your trades at price levels where there is a high probability of it bouncing. i.e buy support and sell resistance, unfortunately if you have a breakout or breakdown strategy which practically buys near resistance or sells near support, then the likelyhood of experiencing the 'chop' will be more frequent. you are only experiencing this because you have a trending only strategy which does not keep you out of the market more than it should do

I dont think anyone could give you an indicator which will be a quick fix but maybe you should pay more attention to a higher timeframe and/or experiement with oscillating indicators(range) also.

to be honest, you just need something to filter or stricter trade criteria. I would suggest you start paying attention to price and buying vs selling pressure, look at the details.

the issue with using these indicators, as you will now have some first hand experience, is that they are a 'one size fits all' tool. there is no difference between one cross or the other, they fail to distinguishe that this instance of 'cross-over' is better than the last one, they give you a bland view of the market.

 

[tomorton]

Hi sunnywan - I tend to agree with the above. I have been taking a close look at the FTSE100 drop over the last week to see if any indicators, price patterns etc. gave a clue this was going to happen starting on the precise day it did. I encouraged others on barjon's swingin' the ftse thread to do likewise. The upshot is that there was no TA clue on the Friday night that the FTSE would drop out of its range on the Monday morning. Notice that the FTSE was ranging, not trending. We all look for price patterns and indicator turning points but these reversal signals tend to work pretty well - IF - there is a trend to reverse. My conclusion has been that in a ranging market when there ios not trend, there will probably be no signal a break-out will occur on a given day, just be long at the bottom and short at the top, with tight stops outside the range, or be in cash until AFTER the break-out. I believe indicators are especially prone to giving false signals in a choppy market.

 

[Claudia123]

Hi sunnywan - I tend to agree with the above. I have been taking a close look at the FTSE100 drop over the last week to see if any indicators, price patterns etc. gave a clue this was going to happen starting on the precise day it did. I encouraged others on barjon's swingin' the ftse thread to do likewise. The upshot is that there was no TA clue on the Friday night that the FTSE would drop out of its range on the Monday morning. Notice that the FTSE was ranging, not trending. We all look for price patterns and indicator turning points but these reversal signals tend to work pretty well - IF - there is a trend to reverse. My conclusion has been that in a ranging market when there ios not trend, there will probably be no signal a break-out will occur on a given day, just be long at the bottom and short at the top, with tight stops outside the range, or be in cash until AFTER the break-out. I believe indicators are especially prone to giving false signals in a choppy market.

On Monday take away all your indicators just have the chart in front of you. Trade what you see - you might just find it refreshing. This is way I trade now - had all the oscillators etc been and done it - simple wins. For me anyway. Good luck

 

[tomorton]

Well said claudia123. I should have made it clear I just use price for entries and exits. I look at 20RSI (Simple) but just to verify market sentiment and from that to judge correct position size. I look at no other indicators (unless you count moving averages, but I don't make entries and exits based on them either).

 

[mrsoul]

Does anyone know of a good indicator or technique which can help minimise getting into choppy trades - ie where the market is chopping within a range?

I'm using a set of trending indicators and they work well when the markets are trending, but during periods of chop, it just kills me and often wipes all my profits.

I'm trading in the 1H timeframe. One technique I've heard of is having a 20expMA and a 30expMA on the chart and looking for the distance between these lines to help determine chances of chop.

Does anyone else use any other indicators or techniques to help avoid chop?

If there was an answer to your question, then it would be very easy to make hundreds of millions.
What destroys,mostly, all sysems is that there seems to be know way of knowing when a range will end and a trend will start, and when knowing when a trend will end and a range will start.
This really is the million dollar question because trend following systems fall apart when the market ranges and range trading systems fall apart when the market trends.
The only suggestion I have is when you see the market starting to slow down, pay attention to how many price changes there are per minute.
If this number is decreasing rapidly, then, chances are, that a range has started- when it picks up, chances are that the market is getting more volatile.
It really is the million dollar question.

 

[forexsniper]

If there was an answer to your question, then it would be very easy to make hundreds of millions.
What destroys,mostly, all sysems is that there seems to be know way of knowing when a range will end and a trend will start, and when knowing when a trend will end and a range will start.
This really is the million dollar question because trend following systems fall apart when the market ranges and range trading systems fall apart when the market trends.
The only suggestion I have is when you see the market starting to slow down, pay attention to how many price changes there are per minute.
If this number is decreasing rapidly, then, chances are, that a range has started- when it picks up, chances are that the market is getting more volatile.
It really is the million dollar question.

thx. this is good advice!

 

[shshao]

For daytrading, I define a market as choppy whenever the 60 minute chart moving average is not in alignment with the 1 minute chart moving average. That keeps me out of the market most of the time, so I use TradeTimeAlert.com to keep me posted when a trend reappears.

 

["D"]

Hi Sunnywan,

My suggestions:

If you are getting chopped up not being able to adjust to the conditions, you should not be trading that issue or those conditions. Move on to another issue or wait for better conditions.

Unless you have experience, and your system is set up for range trading, I would avoid trading in a range, as you are finding out. A Range and a Trend are two different animals.

Trading with the trend is like gravity: it is more than just a good idea.

Indicators have their place, but I agree with the above post, get rid of your indicators in this type of situation. MA crossovers will cut you to pieces in a range. You should be getting out with your profits when the MA’s are triggering you to enter the trade.

If you must use indicators, change the settings to best reflect the market conditions.

Try trading a different time frame which will often smooth out the chop.

I generally do not trade ranges so I am not the guy to ask, however, you may wish to investigate using a pivot point strategy in a ranging market. If you choose this route, be aware there are different variations of Pivot Point calculations, like Woodies, Camarilla…. If the strategy you choose does not specifically define the calculation used, set up a spread sheet with 3 different calculation variations. Use the variation the issue respects best, if it respects any at all.

You are smart enough to ask for help when you see something not working well, and learning the same lesson I did not all that long ago. Believe me I understand what is happening. All though it may not seem like it now, this is a good thing. You are on your way

I put up a post a few days ago. The post was about another topic, Fibonacci. I made 4 brief points at the end of the post. I believe the concept of those end points will be helpful, increasing your success. http://www.trade2win.com/boards/fibonacci/60356-plotting-fib-retracement.html

“D”

 

[shshao]

Daytrading and Scalping hints

Want to learn to stop overtrading? It's simple. Trade only when markets are busy with activity AND trending.

Instead of relying on the published regular trading hours (RTH) for activity, measure the activity of the market makers by the frequency of their moving of bid and offer prices. That's part of the the art of tape reading. Since trends only continue during busy markets, this indicator will keep you out of thin choppy markets.

Also monitors multiple timeframes for alignment, to identifiy market direction as Choppy or Trending. You will have to scan the trends from multiple charts to look for alignment. If the trends don't align, the markets behavior is choppy.

Knowing what time to trade is 90% of the battle. Because if you can stay out of choppy markets, your ability to catch trends will rise dramatically.

 

[NVP]

Does anyone know of a good indicator or technique which can help minimise getting into choppy trades - ie where the market is chopping within a range?

I'm using a set of trending indicators and they work well when the markets are trending, but during periods of chop, it just kills me and often wipes all my profits.

I'm trading in the 1H timeframe. One technique I've heard of is having a 20expMA and a 30expMA on the chart and looking for the distance between these lines to help determine chances of chop.

Does anyone else use any other indicators or techniques to help avoid chop?

hey mate - you and 95% of the rest of us..........!

seriously......play when the big fish are swimming and all markets are humming to generate Forex price moves
(I need all markets moving to assist my own correlation strategies)

7am- 10ish GMT....is one (actually the main one for me)...then when US wakes up (1pm-2pm ish) ?

look at this morning.....Classic trending on short TF's then she went dead.....

just dont fish when everyones asleep........

NVP

 

[NVP]

Does anyone know of a good indicator or technique which can help minimise getting into choppy trades - ie where the market is chopping within a range?

I'm using a set of trending indicators and they work well when the markets are trending, but during periods of chop, it just kills me and often wipes all my profits.

I'm trading in the 1H timeframe. One technique I've heard of is having a 20expMA and a 30expMA on the chart and looking for the distance between these lines to help determine chances of chop.

Does anyone else use any other indicators or techniques to help avoid chop?

of course if you want to be cryptic.....

one TF's Range pattern is actually a smaller TF's trend pattern !
(sorry couldnt resist)

N

 

[timsk]

The other obvious answer to the OP's question is Point & Figure charts. Where a conventional time based chart will chop around within a tight range, a P&F chart will show little or no change (depending on the settings). They won't eradicate the problem completely, but they do a pretty good job of filtering out the 'noise' and just displaying the hard core price action.

As has already been mentioned, indicators and techniques that work well in a trending market don't work so well - or not at all - in a rangebound market. Beside using P&F charts, another possible solution is to assume that the market is rangebound and to trade it as such, until it proves otherwise, i.e. that it's trending. If - and I realise this is a big if - one can extract a small profit in rangebound mode, but leave something on the table so that on the relatively few occasions that a breakout occurs and the market trends, you're already in profit or at least at B/E. Of course, the trader still has to decide how and when to exit, before the trend hits the 'bend at the end'.
Tim.

 

["D"]

Hi Tim,

I cannot comment on P&F charts since I do not have experience with them. I need to take a look at P&F charts on of these days.

One technique I use which I am sure you are aware of is to change timeframes in a range bound market. On a lower timeframe smaller trends develop as price moves between the barriers of the range on the higher timeframe. By dropping down to a lower timeframe I do not violate my trading plan by trading in a range, I continue to trade trends, and if a breakout occurs I am already in the trade. My management techniques do not need to change either because I am not switching strategies. For me it is all about trying to stay consistent. I will often change timeframes in a volatile market too. In a volatile market going to a higher timeframe may smooth out the volatility. Again by doing this I stay somewhat consistent with the conditions I trade in. I do not violate my trading plan or have to change my management techniques.

 

[ephi144]

i didn t have time to read all these message so apologize if i repeat this.

use ADX indicator. set the input to 14 period. if it moves above 21 you have a trend. otherwise its choppy.

i wrote an indicator for a friend who now F*** sells it behind my back forgot the site. nonetheless,
this is what it does:

it starts plotting a line at highest high and lowest low of last 14 bars. if ADX moves above 21 then you take the trade if prices breaks below/above your highest high or lowest low of last 14 period. remember the prices can go higher or lower so you must allow for ADX to move over 21.

note: the site has forex in the name can t find it right now.

 

[Benton D Struckcheon]

I just use the stdev function in spreadsheets and average it over some time period. When its lower than some threshold, which will depend on the characteristic volatility of what you're trading, assume choppy. Above that threshold, assume trending.
Trends occur in markets where volatility is high or increasing, while rangebound markets are low volatility, by this measure, relative to the historical volatility of whatever you're trading.
I use the median function to figure out the threshold, since it gives an unbiased measure, unlike the average function, which is prone to mismeasurement because of high volatility periods weighing more in its calculation.
When the average stdev is very very low, assume a breakout to a new trend is coming soon. It always does, in my experience, which is probably the source of the old saw "Never short a dull market."

 

["D"]

Hi Benton,

Welcome to the forum

I am very interested in your approach with you having my attention, please elaborate.

 

[Benton D Struckcheon]

=STDEV(C1:F18) will get you the stdev for the previous 18 periods for instance, assuming you're keeping OHLC data for whatever your timeframe is, thus the C to F range in the column part of the cell address. My timeframe is 30 minutes, which is why I do 18 periods, since it's more or less a day and a half. OK, a little less.
Next, averaging is simple of course: =ROUND(AVERAGE(AY1:AY18)/F18,4), AY being the column where the stdev function above is.
I'm dividing the result by the last closing price, so that this gets expressed as a percentage of the price. Do this for a few thousand periods, get the median, the minimum, the maximum, do a frequency distribution, and then decide where to place your threshold. The median plus one half of a stdev on the column where you do the averaging is a pretty good place I've found, since most markets spend the majority of their time going sideways (current times are a bit atypical). Thus, assuming .013 as the median, and .006 as the stdev of the average column, the threshold would be .016: .013 + .006/2 = .016. Below that, you're chopping, above, you're trending.
Like everything else, not an absolute rule, just a guideline. Also, the real problem is how to define a trend and then deciding what to do in a ranging market. Also, breakouts are called that for a reason: they break all the rules.
Lots of stuff, but I use the above as a crutch to decide when something I'm trading is trending and when it's not. Crutch is probably the right term, now that I think of it.

 

[bluetipex]

Have a look at John Carter's "Squeeze" indicator, from www.tradethemarkets.com. I find it excellent.

It is based on Bollinger Bands and Keltner Channels.

It is my main indicator.

 

[subarashi]

Well said claudia123. I should have made it clear I just use price for entries and exits. I look at 20RSI (Simple) but just to verify market sentiment and from that to judge correct position size. I look at no other indicators (unless you count moving averages, but I don't make entries and exits based on them either).

If price is what drives you then go to the classic: Point and Figure Charting. Follow the buy and sell signals.