This thread is a reboot of a previous thread ( http://www.elitetrader.com/et/index.php?threads/chop.292695/ ) which, because of a troll, quickly went toxic. I apologize for letting myself get dragged into a flame war and will not do so in this thread. The goal of this thread is to determine if choppy markets can be profitably traded. Although I am not asking for anyone's detailed chop-trading plan, if someone wishes to volunteer such, it will be a much appreciated contribution. We all know chop is devastating for trend trades. Clearly one or more alternative strategies must be used if profits are to be extracted when price "goes sideways". First let's establish some basic definitions so we all start in the same place. If you find you just can't tolerate a particular definition, please constructively propose a usable alternative. From Investopedia, we get the following definitions: Trend : http://www.investopedia.com/terms/t/trending-market.asp http://www.investopedia.com/terms/t/trendtrading.asp Chop : http://www.investopedia.com/terms/c/choppymarket.asp Range : http://www.investopedia.com/terms/r/rangeboundtrading.asp So ... the market has turned choppy and all trend trades have been exited. Is it possible to initiate a new profitable trade in these conditions? And if so, any suggestions how? Thanks.
no, they can not be traded profitably. There is no one in the history of trading that ever made it as a bracket trader. Trading the chop is an allusive dream we have all succumbed to from time to time. But no, you can't trade it profitably. And the only one's who say you can just haven't been trading that long. But you can make a lot of money trading the trend
the difference is, the chop is clearly defined, the trend is always unknown you can't make any money trading something you and everybody else knows
but night after night, day after day, week after week, and sometimes month after month you get to thinking, "Man, this chop is killing me! I could have made a fortune if I was just trading it."
so I suppose, a good trader knows when to trade for the trend and when to trade for the chop...and that is a better trader than me
I think bracket trading is a form of trend trading where you anticipate a breakout. No surprise that fails when chop is rampant. I'm thinking there's something that works anticipating a reversal. I was thinking about scalping. It really doesn't make sense to scalp when the trend is strong. You'll make a lot more money from one nice long trend trade. Fewer commissions at the least. So maybe the only time it makes sense to scalp is during chop. Totally agree. Just remember to get out of the trade when the chop appears.
On the contrary! This is what chop does to amateur traders, it makes you exit a planned trade prematurely, or worse take actions you were not supposed to take before chop appeared.
why do I need to get out when it starts chopping? What difference does it make whether it is sitting in my brokerage account in some foreign currency or sitting in my bank account in base currency? If it's not trending it is none of my concern. I got better things to do than keep up with every little thing that is chopping. The only thing that concerns me is what is trending, especially as to how it is not trending against me.
I don't try to tell the market what to do, I let it tell me what it is doing and respond appropriately. In that sense, there is no premature exit. When the chop rises, the trend weakens to the point where it can no longer justify the trade. That's when to exit. I can always get back in when a new trend arises, which may be a continuation or a reversal. Doesn't matter. What matters is having a sufficiently strong trend to justify the trade. The question here is, can we profit from a sufficiently strong chop? Certainly not by following a trend trading strategy, but maybe something else ....