Trading in choppy markets.
- Thread starter William
- Start date
I think the only way to spot chop is after the fact. If you see a lot of chop all day that may effect your trading but I think you should still trade your plan and try to capitalize on good trends they will happen almost every day. Even in choppy markets I will take everyone of my set-ups the only thing I will do is lower my stop loss. In choppy markets I tend to get stopped out much more often but if you keep your losses small one good trade can cover some choppy stops.
One could say that the current market is choppy and hard to trade but any given day you will still very good trends in stocks. Lets look at two of the stocks that myself and many others like to trade intraday. I mentioned them on my other post, MSFT and GM.
For the last two days GM has traded in a .80 cent range between $45.00 and $45.80. (I will post a quick chart to show this) That would give you good resistance level of about $45.80. This morning while watching GM I noticed some very strong buying on the tape. (I will show a picture in my next post) The buying started to come in strong around $45.70 and it kept coming. You can see on the tape strong buying with a price change from 45.82 to 46.00 in just over a minute. The buying continued as the market and the stock went higher. (I like GM and MSFT because they will usually move with the market.)
All of this buying and a break of the 2 day resistance level of 45.80 would have been a good signal to go long. Because the market had been choppy for 2 straight days I would have been using a smaller stop loss but you will see on the intraday chart (I will post this later) that even with a small stop loss you would not have been stopped out. This baby was a nice straight up trend.
Yes, stocks will always pull back but as you can see in the charts even after 2 days of chop you can get huge straight up trends that anyone could ride all the way up.
Here is a three day chart:
And here is a look at GM intraday:
You can not see prices on this chart but the stock went as high as 47.60 on that morning run up. A price change of almost 2 dollars. If you are trading 1K shares and you can grab 1.00 dollar or more of that move you are off to a good day. You will probably need it because after the run up it was kinda choppy for the rest of the day. The way to get the most out of this type of move is to use some type of trailing stop. Everyone has there own way of getting out of trades. I use my own trailing stop. I just change the stop price as the stock goes up.
You can not see prices on this chart but the stock went as high as 47.60 on that morning run up. A price change of almost 2 dollars. If you are trading 1K shares and you can grab 1.00 dollar or more of that move you are off to a good day. You will probably need it because after the run up it was kinda choppy for the rest of the day. The way to get the most out of this type of move is to use some type of trailing stop. Everyone has there own way of getting out of trades. I use my own trailing stop. I just change the stop price as the stock goes up.
[1]William, I look for a tradeable move ,for example ,in a semiconductor stock,even if the market chops.
[2]Strong stock in a strong sector works.
;stay out of TYC
when it chops[sideways,leave it to the scalpers]
[2.5]Trade with the trend of my equity account chart. If it's down,trade smaller ,trade less,read more.If that trend is sideways or up ,read more also! Pays to read , anchored thru printed charts ,bid price , reguardless of trend,bro. Chop happens,I focus on tradeable moves including an approximate 30 minute candlechart.
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[2]Strong stock in a strong sector works.
;stay out of TYCwhen it chops[sideways,leave it to the scalpers]
[2.5]Trade with the trend of my equity account chart. If it's down,trade smaller ,trade less,read more.If that trend is sideways or up ,read more also! Pays to read , anchored thru printed charts ,bid price , reguardless of trend,bro. Chop happens,I focus on tradeable moves including an approximate 30 minute candlechart.
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William;
[1]Traded 100,200 shares some ,not much ,in July because my downtrend pattern strangely was not setting up much.[Choppy.downtrend in account,July]Usually average 1000 shares more or less.That's what I mean by trading with the trend on my equity account chart.
[2]The stocks i watch and trade have been mostly in great,bear market rallies, in August.[Tek,semi,SPY-QQQ-family,LUV]
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[2.5]Apparently some traders took off ,summer vacation. However the players with the volume and uptrend ability are riding,helping the August uptrend.Great rally,compared to last August.
[1]Traded 100,200 shares some ,not much ,in July because my downtrend pattern strangely was not setting up much.[Choppy.downtrend in account,July]Usually average 1000 shares more or less.That's what I mean by trading with the trend on my equity account chart.
[2]The stocks i watch and trade have been mostly in great,bear market rallies, in August.[Tek,semi,SPY-QQQ-family,LUV]
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[2.5]Apparently some traders took off ,summer vacation.
However the players with the volume and uptrend ability are riding,helping the August uptrend.Great rally,compared to last August.to support previous ANCHOR thoughts; I never, yes I said never, worry about chop; I just wait for my system to get its signals/setups and I act on them. A good trading system that is not too restrictive will always give its signals irregardless of mkt action. Its only after the fact that you realize your results are different/smaller and realize it is/was a chop day. Even in a chop day there is still usually 1-2 good trend moves. So I say stop worrying about what you can't control and just trade what you see or better what your system sees. It's the system stupid!!!!