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Avoiding Sideways Markets

  • #1
  • First Post: Sep 15, 2009 2:44pm Sep 15, 2009 2:44pm
Quite often especially in currencies we encounter situations with no movement in any direction at all.
This is a major cause for losses in such markets as the large spread diminishes your chances and the success rate required to break even becomes high.

I am thinking about ways to determine when market is likely to remain in a range to be able to avoid such times.

What is a good way to determine that a currency will be in a range and what are the currencies that tend to show such behavior most often? I have thought about using DPO to filter out values close to 0 to avoid taking such positions.
Any ideas?
  • #2
  • Sep 15, 2009 2:54pm Sep 15, 2009 2:54pm
Quoting eric
Quite often especially in currencies we encounter situations with no movement in any direction at all.
This is a major cause for losses in such markets as the large spread diminishes your chances and the success rate required to break even becomes high.

I am thinking about ways to determine when market is likely to remain in a range to be able to avoid such times.

What is a good way to determine that a currency will be in a range and what are the currencies that tend to show such behavior most often? I have thought about using DPO to filter...
Eric...instead of trying to "avoid" a ranging market try looking at another pair...usually when the majors are range bound the exotics are trending. Take a look at the EUR/GBP as an example of this. While both the EUR/USD and GBP/USD have been ranging during most of the summer, EUR/GBP has shown some nice trends...check it out.
  • #3
  • Sep 15, 2009 2:56pm Sep 15, 2009 2:56pm
I've learned to embrace these periods of consolidation (some say that pairs spend more time in this state rather than trending) so have found ways to look for profit.

Simple concepts using Support and Resistance can provide wonderful trips up and down these areas whilst waiting for the sort of Price Action that possibly heralds 'the one big trade' we all look for.

One trader who I respect has said more than once - if you can't make money, or at least survive, in a choppy market you'll struggle to make it long term as a trader.

No doubt many will disagree with that comment so I'll duck below the parapet as the bullets come flying in.
  • #4
  • Sep 15, 2009 3:29pm Sep 15, 2009 3:29pm
I personally would avoid trends!! a choppy day can give much more pips then a very trending one, remember!
  • #5
  • Sep 15, 2009 3:44pm Sep 15, 2009 3:44pm
there you have it the holy grail to trading

not loose money ( or be) in consilidation while leaving yourself open to catch the big trends...
  • #6
  • Sep 15, 2009 3:48pm Sep 15, 2009 3:48pm
I recommend you read Billy Ray's thread on sup/resistance trading.

The thing with most traders is they cannot find when the sideways markets beggins or ends. Only through time and experience will you benefit from overall market moves.
  • #7
  • Sep 15, 2009 4:24pm Sep 15, 2009 4:24pm
Quoting PeterFM
I've learned to embrace these periods of consolidation (some say that pairs spend more time in this state rather than trending) so have found ways to look for profit.

Simple concepts using Support and Resistance can provide wonderful trips up and down these areas whilst waiting for the sort of Price Action that possibly heralds 'the one big trade' we all look for.

One trader who I respect has said more than once - if you can't make money, or at least survive, in a choppy market you'll struggle to make it long term as a trader.

No doubt...
Well said.

To add, go get a copy of an old book by John Hill, The Ultimate Trading Guide, specifically chapters 1-6. In it he deals with different market phases, accumulation and distribution and their resulting consolidations and how to tell. Also is the knowledge on how to trade that consolidation range. Similar to Wyckoff's works.

regards
  • #8
  • Sep 15, 2009 4:34pm Sep 15, 2009 4:34pm
What type of range do you mean? There are many ranging periods for any pairs. A ranging market could be seen if you trade higher time frames such as the Daily or Weekly; or do you mean short term intraday ranging market? Also, are you referring to trading during the Holiday period?

The best way to avoid lossing in a sideways market is to NOT trade the market at that time. Wait for some movement and jump in on the ride.
  • #9
  • Jan 15, 2011 10:01pm Jan 15, 2011 10:01pm
what you would do if only in m1 the indi shows Sideways Markets and on m5, m15 etc it shows, let say strong uptrend?
- May Buddha bless you.
  • #10
  • Jan 15, 2011 10:48pm Jan 15, 2011 10:48pm
If your method is to trade with the trend, then you wouldn't put on a trade during consolidation periods. If you do lose patience and jump the gun, then you have a discipline issue. If that's true, immediately stop trading and read books on trading psychology. As for ranging periods, it's easy to spot, as price bounces back and forth between a high and a low. When that happens, just drop down to a lower TF and see if you can catch a trend within the range of the higher TF, or remain on the higher TF and wait patiently for the consolidation to end and a trend to be established after a confirmed breakout.
  • #11
  • Jan 16, 2011 12:12am Jan 16, 2011 12:12am
The biggest problem is that you really wouldn't know when price will start to consolidate until it happens, and that is when your trend trades are "sacrified" and start to wait for a clearer sign of direction before committing additional position. It is possible do a good guess where some consolidations will be likely to happen though.
  • #12
  • Jan 16, 2011 6:43am Jan 16, 2011 6:43am
Quoting bodisatva
what you would do if only in m1 the indi shows Sideways Markets and on m5, m15 etc it shows, let say strong uptrend?
I am afraid that this can't be possible in reality...If you see an uptrend on M5 and M15, then surely you must see an uptrend on anything lower than M5, M1 included....

The reverse might be true, which is, what if you can see an uptrend on M15 but a sideways action on H1 for example....There is a chance this can happen in reality...


Regards,

Nader
  • #13
  • Jan 16, 2011 6:47am Jan 16, 2011 6:47am
Quoting eric
Quite often especially in currencies we encounter situations with no movement in any direction at all.
This is a major cause for losses in such markets as the large spread diminishes your chances and the success rate required to break even becomes high.

I am thinking about ways to determine when market is likely to remain in a range to be able to avoid such times.

What is a good way to determine that a currency will be in a range and what are the currencies that tend to show such behavior most often? I have thought about using DPO to filter...

Well, you are basically trying to solve for 2 unknowns while having only 1 equation....

In such cases, you can't precisely solve for the 2 unknowns, but you can always get hundreds of solutions (Based on assuming values for unknowns)....I believe it's the same concept with what you are looking for...


Regards,

Nader
  • #14
  • Jan 16, 2011 6:53am Jan 16, 2011 6:53am
I've been working this problem for years without any real success, I used to trade Chop and Chop turning to trend killed me, these days I trade Trend and Trend turning to Chop costs me, but thankfully doesn't kill me

You can eye ball, it's trendy but can't see / predict when it'll become chop and vice versa, often I'm thinking Chop then a trend move occurs and I leave 50pips+ on the table.

There are key times, where chop is likely to become trend, learn these times.

Also News, expect the pair if it's got big news coming out to chop before hand then trend afterwards, GU Thursday GMT am for instance, dead cause of news.

There is no system way to do it though, as markets are impossible to predict.
Nothing to it, but to do it!!! Stick to the plan FOOL!!!!
  • #15
  • Jan 16, 2011 9:38am Jan 16, 2011 9:38am
It's not really that big of a mystery. Chart pattern, flattening of moving averages and historical levels of consolidation all tell you when sideways motion is likely to begin. If a higher time frame is in a trend, just buy pullbacks and sell rallies in the direction of that trend. Or, as modanova wrote, if, for example, the Daily is in a sideways direction, trade the ups and downs on the 15-minute.

Rob
  • #16
  • Jan 16, 2011 10:22am Jan 16, 2011 10:22am
I have a simple solution. In cci20 anything between lines 40 and -40 is more less not profitable to trade, there is ranging or consolidation or whatever. beyond 40 and below -40 lines is where the breakouts start and on M15 you can for sure make some nice pips. to use other indi for confirmation of breakout is a good idea.
- May Buddha bless you.
  • #17
  • Last Post: Nov 7, 2019 1:00am Nov 7, 2019 1:00am
Hi Eric,

for me I found it useful to use 3 SMA combination to avoid most of sideways move ( I am using 12,50 and 120 but u can use any combination) . so if you want to trade clear trends then buy only when 12 above 50 and 50 above 120 ... I attach a chart with sideways move when sell or buy condition is not clear.
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