How to Identify Choppy conditions

imjohn said:
Here's some visual examples to go along with my earlier commentary on how I identify choppy conditions. When I see my MA lines flattening out / compressed together, that's my clue to take a break. When they are sloping and spreading out, I'm looking for signals.

I would suggest you overlay some MA lines (or whatever you want to use) and then screenshot several months of charts and train your eye to recognize potential chop. Whatever you use, it's going to take a LOT of hours and hard work.


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Very interesting...

Do you take that break from trading because you've seen the stats of your own trading that reveal the trade signal opportunities that show up in that chop will in fact perform lower (less profitable) in comparison to trade signal opportunities that appear in none chop market conditions ???

The reason for my above question is because I believe (my opinion) that there's a "discipline" aspect to not trading "the chop". Simply, I think traders see that chop, they see the problems in their trading of "the chop" but they continue to trade in it due to "lack of discipline" instead of taking a break from trading when it appears.

Therefore, the issue for some may not really be about how to identify the chop. They may be confuse and the real issue may be about how to be discipline in not trading the chop after identifying it when it shows up.

Simply, its really a discipline issue instead of an identification issue for some and both (identification / discipline) for others.

wrbtrader
 
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wrbtrader said:
Very interesting...

Do you take that break from trading because you've seen the stats of your own trading that reveal the trade signal opportunities that show up in that chop will in fact perform lower (less profitable) in comparison to trade signal opportunities that appear in none chop market conditions ???

wrbtrader
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I take that break because I only want to trade pullbacks during intraday trending periods. I'm not interested in other conditions. If I think the market is in a period of "chop" (on my timeframe), then it's NOT in a trending period (though it may be on a higher timeframe). Bottom line, for what I want to do (trade trend pullbacks), there won't be a "trend pullback" signal to trade in the chop.

I think with time and patience could develop a viable method for trading chop, but I'm content waiting for my trending periods. I set an alert at a level that would indicate the "chop" period has potentially been broken, and then I get back to business.

I agree with you. It's a behavioral issue and not solely an identification issue. Sometimes due to boredom or whatever reason, people want to trade every hour of the day.
 
there are > 3 types of markets :

- trendy, organised market where market moves alot.

- choopy messy disorganised jerky spiky market where market hardly move.

- somewhere in between, 1/2 trendy 1/2 choopy market where market moves alot.

- ?!?!?


Identifying trendy market is straight forward.
very easy to earn money from such market.


Identifying choopy market is an art.
Because it is an art, people tries to make it scientific by putting more and more and more indicators.
It is difficult to describe what is choopy market in words.
If you see my trade Journal, yesterday Europe and US market was choopy,
and it was quite easy to identify it as choopy market.
At times, identifying choopy market is not that straight forward.
Very easy to lose money from such market. So better stay away.




the 1/2 trendy 1/2 choopy market is the most frustrating type.
Market moves alot but very difficult to earn money.
your entry price has to be good, and you have to enter early or
you will suffer loss after loss.
Again identifying such market might not be that straight forward.

So very important to set max number of trades per session,
and max $$$ loss per session.
once limit is reached, off your computer.
 
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I agree with price action being the tell. I would also say relative volume for that hour of the day plays a role too. High volume, high volatility environment can be both whippy and trendy, while low volume periods tend to be a disaster waiting to happen. Check out some old archives like "Help I've been chopped..." thread by Nodoji
 
I wouldn't attempt to day trade with just one time frame. Not saying it can't be done but IMO it can hamstring you. What looks like "chop" (consolidation) may provide an excellent resumption setup for a higher tf. I use 3 tf's and start with the highest and down from there to get the whole picture. As far as "chop" identification, are there a number of overlapping bars? If you use MA's, are they narrowing? Is range shrinking? Such periods get easier to identify with experience. Radiologist go to school for a long time to be able to read an Xray or MRI properly.

And those who don't believe in day trading, should stay off these day trading discussion threads. You just sound like the dopes you are. Yes, it's a tough road but one who many have navigated successfully. If it's not for you then it's not for you. Beyond that, nobody cares what you think.
 
El OchoCinco said:
To be honest, whether you use indicators or not, simply viewing the price action is how I see whether the market is choppy or not. Straight and to the point...
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Everything else tells you after the chop has been underway for some time already and should be obvious.
 
El OchoCinco said:
To be honest, whether you use indicators or not, simply viewing the price action is how I see whether the market is choppy or not. Straight and to the point...
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Yes, but that is subjective to the eye of the beholder. If you want to take emotion out of the process, and especially if you are going to automate the trading method, you need a mathematically defined way of determining trend and chop.
 
Have you tried the Choppiness Index? It's based on ATR, which some have suggested using. Some random links I googled:

https://www.tradingview.com/wiki/Choppiness_Index_(CHOP)

https://tradingsim.com/blog/choppiness-index-indicator/

I had it up on a chart once out of curiosity, but found that I wasn't really paying attention to it, and was in an overall effort to simplify my charts anyway... so I ditched it. Mostly just go by other cues and subjective read that others have kinda referred to now.

Guess that doesn't answer your question asking for a "reliable indicator," since I can't vouch for it either way... but maybe you could experiment with it. Have a couple ThinkorSwim versions, if you happen to use that or want examples to code in other platforms -- just lemme know.
 
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