Identifying chop

Discussion in 'Index Futures' started by Ansare, Jul 19, 2008.

  1. Ansare


    At times I have a blind spot about this. I mean, how hard is it to see sidways action? What I find, though is that while in the middle of things I get too "close" to the chart and somehow fail to see what should be quite clear. The old "forest from the trees" syndrome.

    I need to develop a reliable and mechanical method and wonder what you guys and ladies have come up with. Thanks in advance for any ideas.

  2. Ansare


    OK, either I asked the stupidest question this month, or one of the hardest. Please say so if it IS the former and I'll work harder knowing there is apparently a very good answer easily available.
  3. Boss302


    Not a stupid question at all imo. It took me a while to realize that trying to trade during a choppy market negates my edge. I look at a time frame 3-5 times longer than the one I use to enter my trades to get a better picture if there is a trend or not. Sometimes I switch over to sim trading to get a feel for the market before risking actual money.
  4. Ansare


  5. Actually, it's one of the hardest questions to have a good answer to, and one which you will have to discover for yourself.

    Using multiple time frames is one way of doing it, using a confluence of time frames will generally work better than just one, IMHO.

    Good Lucik.
  6. snp500


    consider using market profile.

    analyzing the first hour's range is a good indication of whether or not the day will be choppy.

    good luck to you :)
  7. Awash



    If you find that you're over analyzing the price action and try to still execute trades when the market is sideways, than set up some rules to prevent this from happening.

    Also, make sure you have a complete definition for sideways action, that way, when it occures you'll be able to identify it immediately. If necessary, mark-up your charts on a daily basis (to include, labeling s/r, breakouts, narrow ranges, pullbacks, et cetera). This will help you identify different types of price action and overall you'll get better at identifying different scenario's to include sideways price action.

    In the beginning, this has helped me tremendously with spotting the price action. From then on, it was a matter of having the discipline not to trade when the conditions weren't favorable.

    Good luck and I wish you the best in your trading!!!
  8. Chop is what happens just before they shake you out of your winning trade.
  9. Awash


    Yeah but you know you can't let the noise (chop) force you out of your trade. Especially a winning trade, you have to force yourself to be disciplined and sit thru the noise by managing the trade properly.
  10. Ansare


    Thanks, Awash, really appreciate the response. You make a great deal of sense and I plan on taking your suggestions.

    I wish you the best in your trading as well.

    #10     Jul 28, 2008