How to Avoid Getting Whipsawed in Chop?

[kut2k2]

Quote from icarus618:

It is pretty simple. Because these are your only choices, it is not possible for you to detect "chop."

Try starting off by asking yourself if the market is in "chop" or "not chop." It might help.

Bingo. When the market is in chop, there is no real direction. Every apparent direction is a false one, and trying to trend trade is a guaranteed loser. People need to determine what type of market they're in before they try to apply some set strategy.

Always trying to trade the trend is a net loser.

Always trying to fade the trend is a net loser.

Only being adaptable is a net winner.

 

[wrbtrader]

Quote from macattack:

Anybody ever have a problem getting caught in chop & falling for one trap trade after another?

If so I was curious if you had any insight on how to recognize it & avoid it...

To get some serious help & answers...

You should post a chart of some recent trades you took in what you call as "chop" along with showing exactly where you have enter/exit trades accordingly to whatever trading plan you're using.

I've often seen traders posting charts of price action that they're trading when they shouldn't be trading (e.g. holiday 1/2 day trading sessions, inactive trading periods, FOMC announcements, intuition trading with no trading plan, trading ranges that's only 1/4 of the daily ATR and so on)...

There problems with the chop goes away when they stop trading any of the above.

Without the above info, very good chance you'll continue being lost in the forest while trading price action you already knew wasn't suitable for trading prior the trade.

How do you avoid it?

Most traders know its chop before they take the trade. Yet, they ignore the warning bells due to lack of discipline via various reasons (e.g. addictive with the need to be in a trade, afraid of missing something, revenge trading, emotional trading and so on).

Answer - Practice being discipline and go back to the simulator until you resolve your problem.

 

[RedTankEra]

To the OP,

Without multi timeframe analysis you are a sitting duck, you want to learn how to go up and down the timeframe scaling to clean up a messy chart.

Study swift moves, learn how candles look like during these moves, then study the messy action and compare, can you tell the difference? It's right in front of you, you just have to look and notice.

 

[macattack]

Quote from RedTankEra:

To the OP,

Without multi timeframe analysis you are a sitting duck, you want to learn how to go up and down the timeframe scaling to clean up a messy chart.

Study swift moves, learn how candles look like during these moves, then study the messy action and compare, can you tell the difference? It's right in front of you, you just have to look and notice.

Thanks for all the replies everyone !

Just so you know I'm on the sim right now.
No more live trades until I know what the hell I'm doing.
It's amazing how much money you can save when you're not giving it away.

I attached an example chart of 3 losses in chop.

I like to use the 1-minute chart as my entry chart (sometimes 300-volume). Then I also have a 5-min chart & a 4000-volume chart up & a daily chart showing just 2 or 3 bars.

Blending the timeframes together to make trade decisions is very confusing to my brain.

What if the anchor chart is going down, but my entry chart has an obvious reversal signal go to long?

What if the anchor chart has extremely obvious resistance, but my entry charts still says price direction is up?

What timeframe would you recommend as an anchor chart if using the 1-minute chart as the entry chart?

Can you maybe give an example of how multiple timeframes would help you to make a trading decision? I feel like this is a big weakness in my trading.

 

[macattack]

Quote from NoDoji:

My warning signal is a flat 20EMA in my main trading time frame.

This makes sense, but here's the thing................I get so minutely focused on the price bars, that I miss the other clues.

I have a 20 EMA on my chart, but I can tell you the last time I got caught in chop I didn't even "see" the 20 EMA.

Sounds dumb, huh?

 

[Handle123]

Quote from macattack:

Thanks for all the replies everyone !

Just so you know I'm on the sim right now.
No more live trades until I know what the hell I'm doing.
It's amazing how much money you can save when you're not giving it away.

I attached an example chart of 3 losses in chop.

I like to use the 1-minute chart as my entry chart (sometimes 300-volume). Then I also have a 5-min chart & a 4000-volume chart up & a daily chart showing just 2 or 3 bars.

I think you are far from real time trading as you have no trading plan in place, and it should be months before trying. I day trade off one minute/60 minute Crude Oil, I don't want to have to look at too much cause I figure most trades are only going to last a handful of minutes. I use trendlines on the 60 minute to show me downsloping off the highs as place to get short or take profit if I was long from below and even not take a long off the one minute if this trendline is coming soon.

You see 3 losses, I see short should not been taken and first trade should have been no worse than breakeven, last trade bought too high, you want to buy lower, lower you can buy, the smaller you have to risk.

I use a mixture of money management tech, one is a time stop which engages after I place the trade on, I do not want price to hang around where I got in after so many minutes, I want to get in and have it take off. By buying right on support, you can risk 3-5 ticks, but farther away, more the risk. You need more defined set of rules for trend.

Chop happens most if EMA is flat, EMA cutting through bars and if using TA like TSI, it be in the middle for a number of bars. Also, volume reduces during chop, time of day-most often after first 120 minutes of day session. If you are good at trend trading, you might want to pass on trading chop, plenty of money can be made in first 120 minutes.

 

[NoDoji]

Quote from macattack:

I attached an example chart of 3 losses in chop.

I like to use the 1-minute chart as my entry chart (sometimes 300-volume). Then I also have a 5-min chart & a 4000-volume chart up & a daily chart showing just 2 or 3 bars.

Blending the timeframes together to make trade decisions is very confusing to my brain.

What if the anchor chart is going down, but my entry chart has an obvious reversal signal go to long?

What if the anchor chart has extremely obvious resistance, but my entry charts still says price direction is up?

What timeframe would you recommend as an anchor chart if using the 1-minute chart as the entry chart?

Can you maybe give an example of how multiple timeframes would help you to make a trading decision? I feel like this is a big weakness in my trading.

Your anchor chart tells you which direction to be trading; your entry chart is for pinpointing precision entries. Unless your'e a micro-scalper, there's no reason to consider a short trade from above the 5-min 20EMA at that point on your chart. There's not enough airspace down to that EMA from which to extract even 10 ticks profit if it holds as support. If you did short, you'd want to scratch the moment it failed to break that level with conviction.

I see no problem with your first trade. Price is trending up to retest the high of a wide range and there's airspace above from which to extract 20-30 tick profit. Before you put on that trade, you have to quickly make a decision: Where would a logical stop loss have to be, and are you willing to risk that much on this trade?

A logical stop loss has to be somewhere below that 20EMA because price often overshoots. A smaller stop loss could be placed just below the support of the 1-min entry, but it's more likely to be hit if price fails to test that previous high. Think fast: trade long with tight stop, take the loss; trade long with wide (20-tick) stop; trade long with tight stop, bail b/e if no decisive move to test the previous high; wait for a pullback to the 5-min 20EMA.

Shorting makes no sense, buying makes sense, but you need a "survivable" stop.

This is the sort of thing a scalper has to do all day. It's work, and it's tiring, but it is what it is.

Those first 120 minutes are definitely golden. If you're aggressive then, you can take the day off

 

[Onra]

Hi Macattack,

The problem is that this huge spike evolved quickly into a tight Trading Range. That means chop / retraces / bad place for stop entries / failed breakouts.
1. Your entry is almost at the top. You might had entered with a buy limit at the EMA and hope for just a move up to the top.
2. I think this is a good idea, but there is no good bear signal bar and you've could have waited for an EMA touch.
3. Double bottom; could have worked. If you really want to trade in this environment, you have to enter early (e.g. above the two doji's with a tight stop), pray for the best and scalp.

Just another "after the fact" analysis...
It helps me also to think about these problems!!

Best of luck!

 

[BonScott]

Quote from milehigh_trader:

When my daddy was in Brazil I was just a little tyke:

Cool AC/DC pic.
Is the little guy with the ball Angus Young or you?

 

[milehigh_trader]

Mang, I wish I knew. I just know that my old mang looked about like that back in the day and we used to take trips to Brazil here and there when life got a little hot. He used to smuggle opium and other fun stuff for a couple of real slick lookin' mulatto dudes and once in a while the ole boys in blue would catch up to us. Momma left when I was no more than knee high to a croc-o-dile polly cause dad always had tight pants for dat brown booty, na'mean?

Anyway mang, we hoped on the great steel tube in the sky (usually just bullshit cessna tho) and slipped through the turnip truck of the law a few times and spent month at a time in Brazil. I hadn't been back down there since I was 6 or 9 but had a good month trading Dec Beaners last year (shout out to my homies in the pit y'all) and wanted to relive some of those sparkles in the back of my frontal lobes and that movie with the colored birds ya know? No Cessna this time though, I really wanted to take VIRGIN but she don't fly into Brazil, but I hopped on a nice airBUS. Thought this thing was gonna be like the yellow jobs we had back in school, who wants to be on the back o' the bus these days? But really, was smooth as a wet cigar. Smoke me a little cheeba, pop a xany, couple of those little bottles of henny on the flight. zzzzzzzzZZZZZZ

If you ever get to Sao Paulo, gotta go to this joint called Mani. Got Dam. Best Filet Mignon I've ever had. Came with mushrooms and some kinda carrot thing, mofuggas know how to cook. Waitress was shaped like the good side of the old batmobile too.