Does anyone have a reliable indicator to use that will help me to avoid trades during choppy price action? Specifically I trade the Index futures.
You cannot really avoid choppy conditions. Even a trending stock could suddenly, go sideways and stop moving higher or lower as the case maybe. If it is trading sideways and you want to avoid it, wait till it breaksout higher or breaksdown lower then, trade in that direction.
John9999, I trade futures as well. From my about 2-4 years of trading actively daily, there is no real way to avoid choppy days. For me, if I have two consecutive losses in a roll, I stop trading for the day and defined day price action as choppy.
When price and Bollingers going sideways is chop, when a moving average is cutting through price bars is clear indication it is not rising or declining. When you can spot the failed attempts of making higher highs/ lower lows and it is confirmed by a close beyond "B" going opposite direction, often times congestion will form and can be considered chop, but it often a spot for trend traders to jump in after new trend has started. As far as an indicator to address chop, you trading price so better you using a chart, but a chop market easily seen by absence of higher high and lows for uptrend, lower highs and lows is a declining market, the highs and lows have stopped making continuation.
The notion and parameters of "chop" are subjective. When the frequency of direction change becomes too high and the magnitude of moves become too small for your method to handle.... that's chop. Some of what one trader describes as chop is tradable by another. (Traders should not try to avoid what they fear to be chop, but rather embrace it. It's a time to sharpen disciple and bolster confidence.)
John9999, I trade with the trend of the day. So If I get stopped out twice, that simply means the market has no trend of the day. No big deal Mr. Market, I take my two losses, and we play again tomorrow. Nice and easy. I save my money for another day.
I use a few moving averages. When they are compressed together and flat, that's a clue that conditions are "choppy" for what I generally want to do. Many times I've experienced "chop" in the first 1/3 of the day, followed by clean movement / clear direction in last 2/3 of the day. So I won't call it quits, but rather just wait. Once the MA lines pick a direction and start to spread out, I'll resume looking for my signals.
this is why you don't "trade" during a bull market. a bull market is always choppy - that's how the professionals gather chips from weak hands and gradually grind up, while making sure short term speculators do not enjoy the benefit of the run. greed is an emotion that is only 33% as strong as fear. this is why the bull climbs the stairs slowly... dollar after dollar the sideline money cannot stand missing the train anymore and they come in, but usually after enough hesitation. on the other hand the bear jumps out of the window. heading for the exit usually takes much less hesitation... that's the environment you want to be a 'trader'.
When people come in and ask questions about daytrading do you always have to jump in with your just go long the Nasdaq shit? If you don't daytrade then stop jumping in on daytrade threads where you repeat the same mantra.