I have contemplated this as well: A chop-trading system does well in choppy markets, but breaks down during strong trends. A trend-trading system performs well in trending markets, but breaks down in choppy markets. Why not trade both systems? Optimize them both to stop-out at break-even and your set.... right?
Excuse me if I'm a bit dim, jboydston, but doesn't this bring us back full circle to the original question? How do you know which to trade? I suspect you are going to say explicitly what I believe you were trying to say implicitly in the above post - ie Trade 'em both and let the market decide. Unless I am missing your point (highly likely), this is fine in theory, but not possible in practice. Take for example a simple first hour breakout system. Obviously on trend days you want to go with the breakout and ride the trend, while on chopchop days you want to be fading the breakout and trading the range. Not possible to do both at the same time. Now I know there are other trend following and range trading methodologies, but at some point, even the best of these will converge into conflicting signals. Tony Crabel/LBR's NR7's, NR4's,WR7's etc (which I believe Brandonf also uses) are very good pointers to possible trend days (on the basis that range contraction tends to precede range expansion), but unfortunately, these tend to occur too infrequently, at least for me. Am I completely missing your point?
No, you understood me right... A very good point. How might it be possible to trade this system then? Is it legal to trade the same instrument from several different accounts? Maybe other instruments like options?
I don't believe it is possible, although some form of options strategy may work. I believe though, at some point, you need to make a determination about which class of strategy (trend following or range trading) to employ - which again brings us back to the original question - how to determine which one. Love these circular threads.