Measuring Choppiness

Quote from dima777:

interesting where you go this one from....and can you please explain what you mean by unique price changes?
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And we have a winner!
 
Quote from dima777:

THANKS.ACYUALLY I AM DEVELOPING FULLY AUTOMATED SYSTEM

I WILL ADD THAT I HAVE CONCLUDED THAT MY EYE CAN BE BIASED AFTER HAVING CODED MY DISCRETIONARY APPROACH..PC WILL NEVER SEE WHAT IS NOT THERE
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Okay. The eye's bias can only cause you trouble to the extent that you don't have predefined and objective entry and exit criteria. If your criteria are valid, then they should keep you from being sucked into too much chop. What I fail to understand is how you can go about coding and automating a discretionary approach. That concept is well over my head.
 
Quote from Pa(b)st Prime:

Instead of viewing my remarks as "rude' why not try to learn. In all liklihood (99.999%) I'm more experienced and profitable than you. That being said I'll give you a quick mini-thought that I get paid to give clients. A pro-bono for my "rudeness."

First: It matters little what time frame you're looking at. "Chop" is relative (like everything eh?). Chop can be defined as in a range. The market has found value at a price point and the trade is just a random auction back and forth. Sellers dry up on the lows buyers dry up on the highs. No need for a definition-a simple look at a bar chart tells all. If you're using Bollinger bands you'll see the bands narrow and move sideways. You'll see a preponderance of bars move back and forth through your 21 period ma. Doesn't matter if it's a 1 minute or a monthly. Once again it's relative to your time frame. What ends the chop?

For starters prices doing something that they didn't do before. If ES hasn't made a bigger move than 7pts one way or the other over x periods the moment the market moves 7.25 it's now done something not true to form. The profile has changed. Will there be follow through? Probably to some degree. Will there be massive follow through? There's no way of telling. All you can do is make the bet and put in a stop at a price that shouldn't be hit if the market is indeed going to expand it's usual range. I suggest you read Curtis Faith's Way of the Turtle for some simple break out formulas.

Just accept that there's no right answers because you're dealing with unknowable outcomes. There's always going to be false breakouts that do nothing more than cause short covering and new longs to appear with their buying then checked by aggressive sellers laying in the weeds higher. Just set up your trades as much as you can with some idea of probabilities and let your positive expectancy smooth out the disappointments from so many individual bummers.
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Good post. KISS
 
There's a mechanical trading system which trades (a diversified basket of) futures contracts, whose central idea is the measurement of "choppiness".

If its "Choppiness Index" is above some threshold, the mechanical system decides the tradeable instrument is currently Choppy, and uses one set of mechanical buy/sell rules to trade in the Choppy environment. However if the "Choppiness Index" is below another threshold, the mechanical system decides the market is Trendy, and it switches to a completely different set of mechanical buy/sell rules.

They don't give the system away for free, instead they sell it for money. About the cost of a new laptop computer, give or take. If you don't mind spending that kind of money to buy a mechanical system, this one is called CATSCAN. (Choppy And Trendy Scanner. Get it?) Google can find it for you. I have no idea if you will like it or not. I also have no idea whether they'll refund your purchase price if you don't.
 
Quote from Thunderdog:

Okay. The eye's bias can only cause you trouble to the extent that you don't have predefined and objective entry and exit criteria. If your criteria are valid, then they should keep you from being sucked into too much chop. What I fail to understand is how you can go about coding and automating a discretionary approach. That concept is well over my head.
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why this is so hard to understand....all technical analysis can be coded - so long as it is based only on the price and no fundamentals for that matter..
 
Quote from dima777:

why this is so hard to understand....all technical analysis can be coded - so long as it is based only on the price and no fundamentals for that matter..
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Because it has always been my understanding that only systematic trading approaches can be coded for automation. Because it has always been my understanding that discretionary trading is essentially the antithesis of automated trading.
 
Quote from Thunderdog:

Because it has always been my understanding that only systematic trading approaches can be coded for automation. Because it has always been my understanding that discretionary trading is essentially the antithesis of automated trading.
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second that
 
Quote from Thunderdog:

Because it has always been my understanding that only systematic trading approaches can be coded for automation. Because it has always been my understanding that discretionary trading is essentially the antithesis of automated trading.
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i see....I assumed that discretionary trading can be systematic - it only uses your brain as a fuzzy system...I assumed that all trading is systematic...when you write a trading strategy into a pc you make it an explicit algorithm...while in your brain it can remain as implicit fuzzy construct....with many layers of hidden neurons )) hidden not only from everybody else but from you too!!)
 
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