does anyone have advice on how to identify choppy days on futures (I trade the NQ) as it is happening? I do great on a trend day like yesterday, but I get chopped up with losses on days like today. If I could make a determination that the range is going to be limited, then I could just scalp trades vs. looking for runners. I have played with ATR and MACD,,, but do not have anything conclusive
If you are having trouble reading price action, try putting on a couple of MA's and look for slope and space between them for directional read. When they are flat, the market is not directional. I use three time frames for my signals and filters, but the ma's can give you a sense of what's going on. The MACD is simply a derivative of two ma's which are themselves a derivative of price.
Well. I got to figure something out. As we know not every day in the market has a huge trend up or down. We had some great days lately
Sometimes chop can be seen in "Megaphone" patterns and stop doing breakouts-"BOs" never a favorite for me anyway. Take a 9sma and if it is running through middle of bars, that is chop, wait for a bars that are completely above or before to find shorter timeframe of a choppy day. I prefer to catch the falling boulder entries, 95% of my entries are this way, risk is tighter and price either stops and reverses or system looks to find area of rebound to get out at breakeven. Also, keep an eye on volume, often times on choppy day you get spikes of volume and little follow through with smaller volume, time to take profits and or reverse. For myself, nothing better than choppy days as there is lots of volume to get in and many traders take losses at same areas so much more of a reversing day for a scalper.
Well, you're asking for The Million Dollar crystal ball question... to be able to see into the future -- and no one can tell you that. Today, and all choppy/neutral days, can be frustrating for the average trader. You're trying to read and predict and manage subtle signs for either a general upwards trend or downwards trend...but it never happens or comes. It reverts back to neutral choppy. But oh well, that's trading...not all days can be an ideal perfectly up or down movement throughout the entire trading day. Part of being an excellent trader...is being patient and open-minded, and being able to manage risks and likewise reward within the overall collective picture. To be able to trade daily or intra-day...is truly part art, part science -- and you have to be able to understand that concept, and apply it in the real world malleable dynamically.
Combine the MACD with slow and fast stochastics. https://www.elitetrader.com/et/threads/the-stochastic-indicator.14129/
Put a 50 sma on the chart like in the example. The example is the ES yesterday 4-9-2018 5 minute chart. The gray 50 sma highlights the intermediate trend. if price is above it then more conducive to long positions. If below it then more conducive to short positions. On the chart we can see that, from the open, price stays well above it. Around 1:30 it turns under and more conducive to shorts. However, that needs to be correlated with not just price turning under but PA action itself such as range of bars..bullish bearish bars...larger range bars...etc.
But the problem is that you took an easy day with a trend. The chart below is the same setting but for yesterday and it gives a completely different outlook. The quotes crossed at least 20 times the SMA. You need a system that works in ALL kind of markets. That's what I speak about if I say you need 10,000 hours. But over 90% of traders NEVER can built such a system. A system that works in ALL markets will almost never have a losing day for a daytrader.