How to Avoid Getting Whipsawed in Chop?

Discussion in 'Risk Management' started by macattack, Dec 13, 2012.

  1. I'm sure you get a lot of comparitive comment up close and personal from those in your real environment. Don't keep us in suspense.
     
    #61     Dec 26, 2012
  2. =================
    Good points;
    and notice over many years-markets tend to trend/persist .Whipsaws tend to persist.. NOT a prediction.

    Probably the worst way to trade,while learning,, is to go long + short quickly.

    And while i agree much with his bullish example;
    big bank sector has had so many lawsuits, bear trends,, study sectors /long term trends also.:cool: Thats wisdom:cool:
     
    #62     Dec 26, 2012
  3. I think your biggest problem is mis-interpreting the nature of the stock market. You seem to be able to lose a majority of time which is good. If "Up" and "Down" are your only options, a coin should be able to be correct half the time. But you should be proud of the fact that, as a human being, you can correctly pick the wrong direction way more frequently than a coin. This should give you hope, because if you can pick the wrong way 8 of 10 times, you can pick the right way 8 of 10 times by flipping your system on its head.
    That tiny meaningless breakout, for example, is called a throw over and it means the best trade is down. People had to give up their liquidity to make that movement happen and now they are not liquid and can't make the price move up anymore. So go down and they will sell behind you and drive the price down.
    Lastly, your desire to "not get trapped again" and to not "miss the bus after getting trapped and stopped out twice" is actually the proof that it will happen. It's the nature of the beast.
    Human assurance is a powerful thing. We become assured of movement by seeing movement. The more movement we see the more assurance we have. The problem is, in the market, movement is created by buyers. The more buyers that have bought the less buyers there are that have money to buy. Assurance means everyone elses liquidity is gone and you are the last one to get on board (or very near the end). Stop looking for assurance and face your fear. Fear means the buyers are hesitant and still highly liquid and you are the first one to get on board. Not wanting to get duped again is an emotion that makes it doubly hard to face your fear. And again, fear is the indicator that you are the among the first to get on the boat.
     
    #63     Dec 28, 2012
  4. MarkBrown

    MarkBrown

    How to Avoid Getting Whipsawed in Chop?

    ez lol don't be a stupid trend trader...
     
    #64     Jan 1, 2013
  5. Daring

    Daring

    I'm sure you did great as a counter trader on Monday.
     
    #65     Jan 1, 2013
  6. MarkBrown

    MarkBrown

    wow didn't think one day of action was a trend - i better go back and study some. lol
     
    #66     Jan 1, 2013
  7. Daring

    Daring

    Oh ya, you better do that, cause for daytraders, Monday was one hell of a trend.
     
    #67     Jan 1, 2013
  8. If you have a method that can identify chop ahead of time, you will have the holy grail.

    When price starts moving in a certain direction it can reverse at any point. That upward (or downward) movement of a certain amount may be the beginning of a huge trend or it may reverse the moment you enter.

    Some people like to wait for the trend to already be established and then enter. They think "based on some criteria, if price moves in a certain direction a certain amount (establishing a "trend,") it is therefore more likely to keep going in that direction. Of course, as soon as you enter it may reverse. There is nothing that says that because price has moved a certain amount in a certain direction is it more likely to keep going in that direction.
     
    #68     Mar 1, 2013
  9. kut2k2

    kut2k2

    OK , I'll be a smart trend trader instead. :D
     
    #69     Mar 2, 2013
  10. Daring

    Daring

    Identifying if the market will chop next is impossible. It's no different than asking if tomorrow market will go up or down, you just don't know.

    Best you can do is notice that it's currently chopping and assume it will continue to do so, until it does not.

    Easiest way to reduce chop is to increase timeframe.

    Everything else is bullshit.

    With that said, the real question should be, what does chop look like in it's early stage/form and which is the lowest timeframe that combines a good balance of chop and stop allocation.

    In other words, don't ask impossible questions, ask realistic ones.
     
    #70     Mar 2, 2013