How to Avoid Getting Whipsawed in Chop?

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.

I always start off by asking myself if the direction of price is up or down. Pretty simple.

But...........time after time............when price starts to chop I don't notice it.

I'll start missing the forest for the trees.

I'll see the tiny, meaningless breakouts within the chop, & since price is now going up, I'll get long.

Then I'll get trapped & lose, & see that price is now going down, so I'll jump in short...............just in time to get trapped again.

Then I figure ok............I got trapped twice, but here comes the real breakout & a reversal back up, so I'll jump back in long, because I sure don't want to miss the bus after getting trapped and stopped out twice.

So then of course I get stopped out again.

Now I'm down significantly, screwed up in the head, & price hasn't even moved. :(

I keep thinking I won't fall for this next time, but then sure enough I fall for it again. It's like my brain completely forgets how to recognize the chop zone a few days after I have one of these episodes.
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What time frame(s) are you looking at?
 
Quote from Daring:

Identifying if the market will chop next is impossible. It's no different than asking if tomorrow market will go up or down, you just don't know.
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I would go further in stating (as boldly as I dare): It does not matter, and one should not care as long as the trading plan is followed with meticulous care. Even if one has a sound system - a fact that should have been verified before ever participating in the game - he/she should be prepared for periods of sub-par performance. It just happens.

By tweaking the trading methodology parameters (such as time frame) you essentially just change the stochastic process generating the return series, i.e. HOW the returns occur as trade outcomes. During the course of years I have found that, without exception, these tweaks always involve a tradeoff. You simply cannot change "this one thing" without affecting others. For example, while moving to a higher time frame does help keeping you out of the chop, it ensures that you will be late when the next big move begins. Now which is better - to avoid chop or be early in a trend? It basically depends on your mental makeup.

As a consequence of this, my advice would be to familiarise how each such "obvious" tweak affects the performance of the system. This enables you to better tolerate drawdown periods and choose the tweaks that help you sleep better as you then understand the tradeoffs you commit to.
 
Quote from Zyker:

I would go further in stating (as boldly as I dare): It does not matter, and one should not care as long as the trading plan is followed with meticulous care. Even if one has a sound system - a fact that should have been verified before ever participating in the game - he/she should be prepared for periods of sub-par performance. It just happens.

By tweaking the trading methodology parameters (such as time frame) you essentially just change the stochastic process generating the return series, i.e. HOW the returns occur as trade outcomes. During the course of years I have found that, without exception, these tweaks always involve a tradeoff. You simply cannot change "this one thing" without affecting others. For example, while moving to a higher time frame does help keeping you out of the chop, it ensures that you will be late when the next big move begins. Now which is better - to avoid chop or be early in a trend? It basically depends on your mental makeup.

As a consequence of this, my advice would be to familiarise how each such "obvious" tweak affects the performance of the system. This enables you to better tolerate drawdown periods and choose the tweaks that help you sleep better as you then understand the tradeoffs you commit to.
More...

+1 :)
 
macattack said:
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.

I always start off by asking myself if the direction of price is up or down. Pretty simple.

But...........time after time............when price starts to chop I don't notice it.

I'll start missing the forest for the trees.

I'll see the tiny, meaningless breakouts within the chop, & since price is now going up, I'll get long.

Then I'll get trapped & lose, & see that price is now going down, so I'll jump in short...............just in time to get trapped again.

Then I figure ok............I got trapped twice, but here comes the real breakout & a reversal back up, so I'll jump back in long, because I sure don't want to miss the bus after getting trapped and stopped out twice.

So then of course I get stopped out again.

Now I'm down significantly, screwed up in the head, & price hasn't even moved. :(

I keep thinking I won't fall for this next time, but then sure enough I fall for it again. It's like my brain completely forgets how to recognize the chop zone a few days after I have one of these episodes.
More...

Hahahaha, I did the same exact thing today into which it developed a large H&S pattern. Gave back most of my profits I made in CL and TF.
 
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