How to know trend or chop in REAL time

[galvinlee888]

Investor only care for price up or down, in chop time they just "buy and hold".

For directional traders, most of them are leverage and they only care two scenario: market is trending or chop.

Chop is the great opportunity for scalpers, a big trend will kill them alive if they don't cut their loss in early stage. However, a tight SL means they will get stop out frequently which is in contradict with this strategy, and it is not easy to define the SL as no one will know the volatility in real time.

Trend is the great opportunity for trend follower, they just ride the wave, e,g, the oil, Chinese market, or even DAX recently and win big. They will get stop out frequently if the market chop and die with thousand cuts.

It is easy to point out chop or trend in hindsight and anyone with 2 hours chart training will be able to do this, some so call "expert" will try to show some BS approach like drawing a channel or parallel line and recommend to trade at extreme, but in reality the market will eat you alive when it is continue to chop even you try to trade in those extreme / pivot points

I haven't seen any "guru" ever show this (e.g. how to know chop or trend in REAL time) with any high accuracy (more like 50%/50% the best ), even those supposed to be the "famous" or legend one.

Anyone has something to share ?

 

[loyek590]

yes, if you are a trend trader, going in, you know most of the time the market chops, your survivability depends on accurately counting the cost of the chop

what all trend traders don't know is how hard and how long it will trend when they are finally on the right side

so we can always estimate pretty accurately our loss, but we never know our profit (if any) potential

 

[galvinlee888]

yes, if you are a trend trader, going in, you know most of the time the market chops, your survivability depends on accurately counting the cost of the chop

what all trend traders don't know is how hard and how long it will trend when they are finally on the right side

so we can always estimate pretty accurately our loss, but we never know our profit (if any) potential

The million dollar question here is you don't know how long you have to stay with those small losses due to chop before the market turn to trend. You also don't know if your big profit can cover your small but large number of losses.

This go back to the same question, how you know "when" the market is trend or chop, as trend trader you will try not to get into the market when it is chop and the scalpers will do the opposite

 

[loyek590]

The million dollar question here is you don't know how long you have to stay with those small losses due to chop before the market turn to trend. You also don't know if your big profit can cover your small but large number of losses.

This go back to the question, how you know "when" the market is trend or chop

I like the question, more should ask it. You know for a fact how much money you have to start with. True, you can never know for sure how long the chop will last. But you do know how long you can last and overestimate it based on your account.

If you are looking for an answer to the question, "If the trend finally appears will I make enough money to cover all the losses of the chop? You may as well be asking is there a sure fire way to make money trading?

My guess is most of us trend traders started out with small accounts as scalpers. That is a very good way to learn the balance of the chop vs the trend.

getting back to your question which is a good one, we never know if our trend will ever pay for all the chop, but the one thing we do know is how long we can survive the chop until it is all gone

otherwise, I like this conversation, your original post summed it up very neatly.

I think where you are getting it wrong is the "need to know". I can only know how much I can lose, I never know how much I can make.

And that is why I detest bracket traders. Not just the losers on ET, but also the brokerage firms who mouth off on CNBC (some of whom I own stock in) when they issue a buy and a target.

 

[dbphoenix]

In my trading plan, it's very simple: if I'm "stopped out"* of both sides of a trade sequentially, I'm in chop, or at least the beginning of chop (this signals the very beginning, so the characteristic range that is coincident with chop is not yet obvious to one who has no plan). This may resolve itself in minutes or it may not resolve itself for hours. Friday was an excellent example.

*By "stopped out" I don't mean a fixed, mechanical stop; I mean that the integrity of the trade does not meet or no longer meets my criteria, so I exit. I "stop out" myself.

 

[loyek590]

unlike gambling on craps or roulette where the trend is clearly defined and limited to protect the casino's interest, there is no limit on winnings for a small retail trader

 

[loyek590]

In my trading plan, it's very simple: if I'm "stopped out"* of both sides of a trade sequentially, I'm in chop, or at least the beginning of chop (this signals the very beginning, so the characteristic range that is coincident with chop is not yet obvious to one who has no plan). This may resolve itself in minutes or it may not resolve itself for hours. Friday was an excellent example.

*By "stopped out" I don't mean a fixed, mechanical stop; I mean that the integrity of the trade does not meet or no longer meets my criteria, so I exit. I "stop out" myself.

you and me both, but we are trying to address the original problems of trading, and 90% of that is some kind of money management plan that can keep you alive when you are really fucked up and got it all totally wrong.

I use the words "STOPPED OUT", it just means throwing in the towel and admitting you got it wrong, as far as the amount of money you have in your account to prove that you were actually right if given enough money and time.

how many times do I have to say it? 90% is having a reasonable money management plan which can keep you alive during the dark drawdown periods when it seems like God himself is personally against you.

You'll never make money gambling against the bracket trading casinos who have the good side of any bet over time. Just one losing bracket trader with bad odds against a bracket trading casino who has set better odds for themselves.

 

[loyek590]

otherwise, on this fine spring Saturday morning when the weather is favorable and the market is closed, I should probably recuse myself from this conversation having finished up the week 100% flat after getting lucky on that GBP election. I started out with 3/4 v8 and a little tabasco and 1/4 Skoal Vodka. Amazing how smarter that breakfast makes me feel.

 

[Eddiemorra]

I think what's really being asked is ''how do you know when price is about to start chopping aorund?''. (answer: I don't know. I don't think anyone does)
I mean, you can identify chop in realtime with your eyes, and when you see that moves either way seem unsustainable and longs and shorts are all being stopped out and price isn't going anywhere.
The problem is that this information is inevitably too late to act upon.
Once you realise you are in 'chop', you've already been stopped out a few times.
Even worse, once you have identified 'chop' you decide to stay out, and that's when you miss the big move! Or you decide 'Right, we're in chop. I'm gonna short move up and buy moves down. Bollinger band style trading'', and that's when it makes the trend move and you are stopped yet again

 

[loyek590]

I think what's really being asked is ''how do you know when price is about to start chopping aorund?''. (answer: I don't know. I don't think anyone does)
I mean, you can identify chop in realtime with your eyes, and when you see that moves either way seem unsustainable and longs and shorts are all being stopped out and price isn't going anywhere.
The problem is that this information is inevitably too late to act upon.
Once you realise you are in 'chop', you've already been stopped out a few times.
Even worse, once you have identified 'chop' you decide to stay out, and that's when you miss the big move! Or you decide 'Right, we're in chop. I'm gonna short move up and buy moves down. Bollinger band style trading'', and that's when it makes the trend move and you are stopped yet again

and longs and shorts are all being stopped out

man, you got that right. The market will chop until it clears out all the longs and shorts with stops

makes a very good case for trading without stops, but that requires money management, and most just want to believe they can guess what will happen.

If you have ever been in a bad marriage, in retrospect, it probably would have been better if you had set some stops. They don't have to be fixed hard money stops. But just some kind of stop, based on price, or your account balance, or what Janet Yellen says.