Eliminating choppy signals

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Valentino104

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Hi All,

after reading quite a bit of posts I decided to join trade2win and hopefully this will benefit my trading! And in the longer term, perhaps my input could eventually improve others trading just a bit as well...

Currently I am running an excel based model which is based on point figure charts and which takes all big trades, but also takes a lot of false signals ie whipsaws in periods of chop/horizontal price movement. If I could identify these transactions ex ante and exclude them, I feel I could greatly improve my results. I was hoping that I would see instant results when I applied the FRAMA concept (more adaptive MA) to my trading system as it should move flat in choppy periods but fail to get significant results yet. Even though SMA/EMA are obviously lagging and overshooting, the FRAMA does actually increase the number of whipsaw trades as it traces prices so closely. I have tried Ehler's distance coefficient as well (see link to an application of it in eg Excel) and it produces roughly the same results. Here's a nice link to this latter indicator:

http://www.traders.com/documentation/feedbk_docs/2001/04/TradersTips/TradersTips.html

Hence I turned my attention to identifying periods of congestion, so that my system would not execute signals in these periods. For this I also used the FRAMA application of the estimate of D over a number of periods (see etfhq.com); a high value would indicate chop and lower value a strong trend. Also here I failed to see instant improvement, as not all trends were confirmed and some choppy signals were still taken. Vertical horizontal movement is another technique that I will be trying in this respect but i have a feeling that results should be similar. Are there some other traders who have been taking this route before me, and have sold this issue in the meantime?

Looking for your smart contributions, thanks a lot in advance!

Barry
 
:eek:

I think you're going to struggle to resolve this one, to be honest.
 
Jimmy,

Thanks for your encouraging words... ;-) hopefully we'll make at least some progress or learn something useful.

What have you tried/learned from this?

thanks

ps where can I learn the Pazman shuffle ;-)
 
Jimmy,

Thanks for your encouraging words... ;-) hopefully we'll make at least some progress or learn something useful.

What have you tried/learned from this?

thanks

ps where can I learn the Pazman shuffle ;-)
 
Valentino104 said:
Hi All,

after reading quite a bit of posts I decided to join trade2win and hopefully this will benefit my trading! And in the longer term, perhaps my input could eventually improve others trading just a bit as well...

Currently I am running an excel based model which is based on point figure charts and which takes all big trades, but also takes a lot of false signals ie whipsaws in periods of chop/horizontal price movement. If I could identify these transactions ex ante and exclude them, I feel I could greatly improve my results. I was hoping that I would see instant results when I applied the FRAMA concept (more adaptive MA) to my trading system as it should move flat in choppy periods but fail to get significant results yet. Even though SMA/EMA are obviously lagging and overshooting, the FRAMA does actually increase the number of whipsaw trades as it traces prices so closely. I have tried Ehler's distance coefficient as well (see link to an application of it in eg Excel) and it produces roughly the same results. Here's a nice link to this latter indicator:

http://www.traders.com/documentation/feedbk_docs/2001/04/TradersTips/TradersTips.html

Hence I turned my attention to identifying periods of congestion, so that my system would not execute signals in these periods. For this I also used the FRAMA application of the estimate of D over a number of periods (see etfhq.com); a high value would indicate chop and lower value a strong trend. Also here I failed to see instant improvement, as not all trends were confirmed and some choppy signals were still taken. Vertical horizontal movement is another technique that I will be trying in this respect but i have a feeling that results should be similar. Are there some other traders who have been taking this route before me, and have sold this issue in the meantime?

Looking for your smart contributions, thanks a lot in advance!

Barry
Click to expand...

Hi Barry welcome to T2W,

I'm afraid Pazienza is being very truthful, I have been on this long road for almost 3 years and I have done similar things to what your doing now. You'll move from indicator to indicator trying to find the one that works all the time (you won't) it's in there nature to work well sometimes and other times they are complete and utter s*it. Find one that you can work with and stick with it or you'll still be here in a year or 2 looking for it (trust me).

JD
 
JD,

hopefully in 2 years I am still improving on my system, and not already abandonned it since it's crap. If i would be still working on it by then, I at least stand some chance in achieving my ambition because there's reason to continue and I havent abandonned yet;-)

With point and figure (pnf), trailing stop and money management it (across 50 stock/indexes/commodities for 3 years EoD data) already produces 55% hitrate, profit factor 3 and a respectable number of investment/transactions (long/short) and rate of return. With this I replaced my initial trend following indicator model (MA/MACD and RSI confirmed), with which I achieved similar results but only with the inclusion of around 4 rather arbitrary (as I now see it ...) filters. Hence I feel it could be improved by including one more filter without contradicting but supporting the pnf signal, and from what I visually conclude it could be by excluding transactions entered in weak trends; a pnf signal is triggered upon a choppy movement, and the system trades despite the weak or ending trend. Also MA confirmation would not exclude these signals.

Could measuring trend strength be an alternative you think? Anybody here got some ideas on that?

Thanks
Barry
 
You’ll think I'm being facetious, but I’m genuinely not.

The method I use to avoid trading whipsaws is to look at what the price is doing for the last screenful of bars. If it’s whipsawing, wide-ranging or channelling, I don’t trend trade it.

When it looks like it’s in a trend, I trend trade it.

I don’t catch the entire move.

I don’t need to catch the entire move.

I just need to catch enough of the move, once I recognise it as such, to take a position to give me a profit.

Ditch the inds.

Ditch the MA variants.

Use your eyeballs.
 
TheBramble said:
You’ll think I'm being facetious, but I’m genuinely not.

The method I use to avoid trading whipsaws is to look at what the price is doing for the last screenful of bars. If it’s whipsawing, wide-ranging or channelling, I don’t trend trade it.

When it looks like it’s in a trend, I trend trade it.

I don’t catch the entire move.

I don’t need to catch the entire move.

I just need to catch enough of the move, once I recognise it as such, to take a position to give me a profit.

Ditch the inds.

Ditch the MA variants.

Use your eyeballs.
Click to expand...

Hilarious:LOL:
 
Not all whipsaws are bad, you either keep them or ingnore them, let your draw down run until they are tired of fear and withdrawing from the market. The market will normally reverse back to go up again. It is a matter of risk and how you spread your risk among several markets.

Keep the draw downs and never lose any trade
 
TheBramble said:
You’ll think I'm being facetious, but I’m genuinely not.

The method I use to avoid trading whipsaws is to look at what the price is doing for the last screenful of bars. If it’s whipsawing, wide-ranging or channelling, I don’t trend trade it.

When it looks like it’s in a trend, I trend trade it.

I don’t catch the entire move.

I don’t need to catch the entire move.

I just need to catch enough of the move, once I recognise it as such, to take a position to give me a profit.

Ditch the inds.

Ditch the MA variants.

Use your eyeballs.
Click to expand...

Beautiful (y)

Peter
 
Have you considered time and the relationship between that and choppiness? Time of day (if intraday), day of the week or time of year etc.

Also have you considered - rather than filtering out choppy trades completely - finding a way which tells you soon after entry that it is chopping, and following that, a way to limit the damage?
 
fcta said:
Not all whipsaws are bad, you either keep them or ingnore them, let your draw down run until they are tired of fear and withdrawing from the market. The market will normally reverse back to go up again. It is a matter of risk and how you spread your risk among several markets.

Keep the draw downs and never lose any trade
Click to expand...

huh?
WTF is this? Let your drawdowns run??

Peter
 
Shakone said:
finding a way which tells you soon after entry that it is chopping, and following that, a way to limit the damage?
Click to expand...

1. You enter when stock markets or stock exchange houses opened. If it is forex London time is the best. This is for day traders only. If you are a weekly or monthly trader, opening time is irrelevant.

2. Your indicator must be in oversold zone (CCI) is the best. You do not need tons of MA or any analysis.

Market is a matter of picking the bottom and top. Pick it right, remain there, you can remain in the bottom for days, weeks, even months. but market will go up.
 
fcta said:
1. You enter when stock markets or stock exchange houses opened. If it is forex London time is the best. This is for day traders only. If you are a weekly or monthly trader, opening time is irrelevant.

2. Your indicator must be in oversold zone (CCI) is the best. You do not need tons of MA or any analysis.

Market is a matter of picking the bottom and top. Pick it right, remain there, you can remain in the bottom for days, weeks, even months. but market will go up.
Click to expand...

This is a f***in' wind up, isn't it?
 
fcta said:
Market is a matter of picking the bottom and top. Pick it right, remain there, you can remain in the bottom for days, weeks, even months. but market will go up.
Click to expand...

Thank you. I have remained in the bottom for weeks, but now, one of us has to go to work to earn money.

Can I remain in bottom while he work or should I do decent thing and become Catholic priest?
 
ffs..I just noticed he's a vendor too.

That explains everything. GOD had been trying to protect him from draw downs by placing a large STOP sign on his front lawn each night. But being the vendor that he is he's probably marketing them as some kind of money making scheme.

Peter
 
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