How to Distinguish between trending and Choppy Days

Discussion in 'Technical Analysis' started by Flashboy, Oct 10, 2003.

  1. Looking for advice on how to distinguish between trending and choppy days..

    Days like today kill me..

    Anybody have any good suggestions..

    Also, looking for advice on how to tell when a choppy day may be coming.. and also when the market is going to break out of a range..

    This is probably as easy as just looking at the price action but am wondering if any of you guys/gals have good advice on the subject..

  2. funky


    flash...depends on what strategy you are playing, but today was just another day..don't worry too much about it. if you are 'getting killed' on a day like this, then maybe your strategy isn't that good. make sure you keep good statistics on your p/l so you know whether its just not working or if its just a normal drawdown from your system.

    the answer to your question remains a good example of what traders should think about when developing a system. they should think: "does this strategy do ok in all conditions, not just the one i'm thinking about". if the answer is no, then see what things 'break' the system. see how the system can be changed so that these kinds of days are just a bump in the road.
  3. Com'n flash. Jeez. If you knew beforehand what the market was going to do it would take all the fun out of it.
  4. Perhaps watch the market breadth indicators such as the TRIN and see if it's giving you a very CLEAR picture of where the market is headed. For example, this morning, the TRIN was just bouncing between 0.90 and 1.10 so it wasn't very bullish or very bearish, meaning it was not providing a CLEAR picture of whether market was going up or down. So, I just scalped the ES up and down multiple times the first hour.

  5. funky


    fast....unless flash has multiple systems trading at the same time, and he's 'trading' his strategies, there really is no reason for him to 'predict' trendiness....

    ....on the other hand, if you WERE to 'trade' your systems, meaning that you put on one system when certain conditions exist and another when another exists, etc... then you would want to do this.

    imho, it would be neat to be able to predict so i could switch my strategies, but i find it really not worth it at this time. as long as the market is moving over the long run (week to week), you are gonna have plenty of profits anyways.
  6. Funky, I don't really know his methods of trading. I'm a discretionary trader and I like to know what the overall market is doing so I can try to 'go with the flow'. TICK/TRIN gives me a good snapshot of the market. I also use the TRIN to time my entries.

  7. Hey Fast,

    Thanks.. how do you use the TRIN exactly??

    Would you mine explaining??
  8. Flash, I don't mind explaining, but I do caution you, I am a newbie myself so take whatever I post with that fact in mind.

    Here's how the TRIN is calculated: (# of advancing issues / # of declining issues) / (Total up volume / Total down volume)

    A value of less than 1 is considered Bullish, and over 1 is considered bearish. I watch the 3 min. chart of the TRIN. When it starts heading up, I look to short, and when it starts heading down, I buy. In my mind, values between 0.85 and 1.15 are not CLEAR signals since they're not very bullish nor very bearish. They're just inbetween meaning the market could move higher or lower. So, this would be when I would scalp the market. If the TRIN is at 0.70 and dropping, this is a very bullish sign and I would feel comfortable holding Longs. By the same token, if the TRIN is at 1.20 and moving higher, I would hold a short position and try to get more points per trade.

    This morning the TRIN was indecisive; it was bouncing bewteen 0.90 and 1.10 so I was scalping the ES banking 3-5 ticks on each trade.

  9. I trade nasdaq stocks. So I made a list of every nasdaq stock that is greater than 20 bucks and trades over a million shares.
    I have them listed on IB on three pages. Before the market opens I check to see how many are up or down. If virtually all are up, I figure it is going to be at least a big opening and vice versa. Based upon this information I decide which direction that I am going to trade. If the results are mixed, I stay out.

    But I still don't know which stock is the best to trade.

    For example:
    The stock that is up most.
    The stock that is up least.
    The stock that is down the most.

    Any suggestions or better ideas all together.
    Peter D
  10. Peter, I used to do something similar when I was trading the semi-conductor stocks on Nasdaq. Do you trade a particular sector or just any high-volume Naz stocks? It's easier if you have these divided into sectors because then you can quickly identify the strong and weak sectors. Then, you look at the TRIN...if the overall market is up, you go long on the strong sector stock. Otherwise, you short the weak sector stock.

    #10     Oct 10, 2003