What is your best chop indicator to keep you out of choppy markets? | Forex Factory

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What is your best chop indicator to keep you out of choppy markets?

  • #1
  • First Post: Edited Nov 16, 2012 3:49pm Nov 15, 2012 2:46pm | Edited Nov 16, 2012 3:49pm
There are all kinds of methods and systems of entries and exits but every one that I have ever seen or heard of failed in times of chop.

Does anyone have a good indicator to prevent taking an entry signal when price is choppy?

I am especially interested in something that will indicate chop when using Renko charts.
  • #2
  • Nov 15, 2012 3:06pm Nov 15, 2012 3:06pm
Quoting ZInvestor
There are all kinds of methods and systems of entries and exits but every one that I have ever seen or heard of failed in times of chop.

Does anyone have a good indicator to prevent taking an entry signal when price is choppy?

I am especially interested in something that will indicate chop when using Renko charts.
you can use your eyes .... they are the best indicators...
  • #3
  • Nov 15, 2012 3:38pm Nov 15, 2012 3:38pm
Quoting BalkanPips
you can use your eyes .... they are the best indicators...
pretty standard answer on FF

@ZInvestor
all indicators show you the past, so you can make conclusion
  • #4
  • Nov 15, 2012 7:04pm Nov 15, 2012 7:04pm
Quoting alexLV
all indicators show you the past, so you can make conclusion
pretty standard answer on FF

It's been a while since I posted on FF, I come around every now and then just to see how much things stay the same here.

I take it from your question that you are a trend trader and chop is killing your results. You get a good runner or two and then you get pounded by a market that seems to get jealous of your success.

First let me say that there are no indicators, candlestick patterns, moon phases, solar eclipses or even eyeballs that can predict that a choppy market is coming. Some can show you that you are in a choppy market but not that one is coming.

There are several things you can do to minimize the impact of a bad market.
1. Switch to scalping when you see the market is choppy. Most people are uncomfortable with this as it is a complete departure from their normal style.
2. Stay out of the markets and wait for a trend to develop. Good way to do it but you tend to miss out on good trends.
3. Reduce your risk on your initial entry. Look back in history and see how many pips your normal trade had to move on average before you could comfortably say the trend is working. Maybe your normally risk 3%. Reduce that to less than 1% on initial entry, then wait for the market to show you that it is trending before putting on the other 2% or more.

Hopefully that makes sense and is helpful.
  • #5
  • Nov 15, 2012 8:19pm Nov 15, 2012 8:19pm
Hi!

I agree with BalkanPips. Use your eyes is the best if you have the right concept and mindset.

Don't trade rely on time frame. Each time frame does have different pattern, choppy and many noises. Trade and look at overall scenario for intraday pattern. Example for EURUSD: Overall 4 patterns that could be seen by your eyes daily-Rise from point A to point B= "/" pattern, rise from pt A reverse to pt B near open price="^", rise from pt A reverse to pt B far away open price= no right symbol shows here...haha, rise from pt A reverse to pt B below open price and back to pt A= "N".

These pattern always repeats because this is just it is. Market open > volatility surge > price shift to next location > meal break > rest/correction > volatility surge again for 2nd half time > price shift to next location in trending or reverse > market close and that is for the day

Any indicators or time frame is not important for trading. It is not necessary important to entry or exit when indicator show signal. The entry and exit is how you define the area/range with reasonable RR ratio. When you are experience in time, you would know how simple* is trading.

*This is not simple if you are emotion trader.

Thanks.
  • #6
  • Nov 16, 2012 2:53am Nov 16, 2012 2:53am
To prevent your profits vipe out:

1. You must understand that Ms. Market always change so you must have more than one trading strategy! You must always adopt yourself with her with a well predefined trading plan.
2. You must increase your experience by doing "NAKED CHART WATCHING". Not one day or two, I mean more than 1000 hours of chart watching. To me any time frame higher then H1 is ok for this purpose. You could do this in a higher speed IF you use a forex simulator. Google it, you will find a good one here in FF.

IF YOU UNDERSTAND & USE THESE TWO STEPS CORRECTLY YOUR TRADING WILL IMPROVE BY TIME!

I myself trade based on my naked chart watching experience (recognizing Price Action Patterns by my eyes) & only use one MA to guide me for the trend direction. Its NOT a holy grail but its working.

Regards,
Manage probability while following the TREND.
  • #7
  • Nov 16, 2012 3:35am Nov 16, 2012 3:35am
if by chop you mean ranging that's where some of the easiest points are why stay out?


WENDIGO
  • #8
  • Nov 16, 2012 5:20am Nov 16, 2012 5:20am
If you want to use an indicator, it means you want to define what a "chop" is. The best way to define a range, or consolidation, is to decide what is the high and low of any given time frame over a set period.

Price channels, sometimes called Donchian channels, do this very nicely. It is up to you what settings you will use.
Gone to a better place
  • #9
  • Nov 16, 2012 5:23am Nov 16, 2012 5:23am
I trade the H1 charts using a modified version of THV (mixed with some elements from the Genesis system). What keeps me out of choppy markets though is the Damiani Volatmeter indicator. Spent a TON (!!) of time figuring out what settings achieve that, and found some that work for all pairs I trade

Don't PM me for settings, don't be lazy!! I'll give you a hint though: They periods entered are fairly short

I also use a Fractal support/resistance indicator that shows me when price is ranging...
  • #10
  • Nov 16, 2012 5:39am Nov 16, 2012 5:39am
MagnumFreak,

Long time no hear from you. Nice advise you give in post #4 & without your usual sarcasm haha. Just kidding as I do admire post from a fellow southerner such as yourself. I too have been away for a long time & found that works better for me. Thanks for sharing your wisdom. Have a good Thanksgiving holiday.

___________________________
  • #11
  • Nov 16, 2012 8:32am Nov 16, 2012 8:32am
Quoting ZInvestor
There are all kinds of methods and systems of entries and exits but every one that I have ever seen or heard of failed in times of chop.

Does anyone have a good indicator to prevent taking an entry signal when price is choppy?

I am especially interested in something that will indicate chop when using Renko charts.

Why don't you use that renko itself..? Renko could be good indicator to 'see' choppy market.. especially if you use small brick renko
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  • #12
  • Nov 17, 2012 12:02am Nov 17, 2012 12:02am
I believe the trick is to learn to trade long and lower timeframes or using trend and counter trend systems.

as long as both system have positive expectancy they will reduce drawdowns significantly.
wo-yoy! wo-yoy! wo-yoy! wo-yoi! wo-yoy-yoy-yoy!
  • #13
  • Nov 17, 2012 12:55pm Nov 17, 2012 12:55pm
Quoting magnumfreak
pretty standard answer on FF

Hopefully that makes sense and is helpful.
Great to see you posting again. Why not stay a while?
Gone to a better place
  • #14
  • Nov 17, 2012 1:52pm Nov 17, 2012 1:52pm
Ranging equals Chop. Wait for a true breakout or if you have a trending indicator, it will tell you that you are leaving the chop. As the others have said, " Use Your Eyes" One last clue...I trade with 5 time frames in front of me for each pair. 1m 5m 15m 1H 4H, the direction of the 1m drives the 5m, the 5m drives the 15m and so on......watch an 8,3,3 stochastic and place a 50% line on it and watch price closely during the busy times NY London etc. Take notice the direction price is traveling, then place a 20% and 80% and watch price as it crosses these levels, look at the momentum that picks up if the stochastic stays above the 80% or below the 20% line for any period of time.....The More You Learn, Then More You Earn.....
The More You Learn, The More You Earn.....
  • #15
  • Nov 17, 2012 3:22pm Nov 17, 2012 3:22pm
Quoting magnumfreak
pretty standard answer on FF

It's been a while since I posted on FF, I come around every now and then just to see how much things stay the same here.

I take it from your question that you are a trend trader and chop is killing your results. You get a good runner or two and then you get pounded by a market that seems to get jealous of your success.

First let me say that there are no indicators, candlestick patterns, moon phases, solar eclipses or even eyeballs that can predict that a choppy market is coming. Some can show you that you...
Your example (regarding golden geese) inspired me; I wish I could shake your hand..(not too far behind)
  • #16
  • Nov 17, 2012 3:54pm Nov 17, 2012 3:54pm
Hello,
There is not any definite answer to your question.
I believe you can detect whether market is choppy, but the way of detection completely depends on your trading strategy,
If you are a trend follower, maybe you should not trade when market is choppy or you can look at other currencies to see their behavior and compare them with your chart.
If you are a programmer you can develop a script to tell you the deviation percentage of current Bollinger band and its average from the same period.

Here is the list of currencies behavior:

Correlative pairs
-------------------
EURUSD-GBPUSD
AUDUSD-NZDUSD
EURAUD-EURNZD
GBPAUD-GBPNZD
USDCHF-USDDJPY

Mirror pairs
-------------------
EURUSD-USDCHF
AUDUSD-USDCAD

Pair that react late
-------------------
EURUSD-AUDUSD
EURUSD-USDCAD
EURUSD-NZDUSD

Good luck,
  • #17
  • Nov 17, 2012 4:17pm Nov 17, 2012 4:17pm
Quoting Thoughts
Your example (regarding golden geese) inspired me; I wish I could shake your hand..(not too far behind)
I beg to differ, with your comment that there is nothing that will predict a choppy market. I trade with 5 time frames in front of me. 1m 5m 15m 1h 4h, when the trend is down on the 4h, up on the 1h, down on the 15m up on the 5m and down on the 1m you have chop and a stalled market. With time watching the 5 times frames together, you can see the start of trends and the start of chop as each time frame lines up or goes against each other......
The More You Learn, The More You Earn.....
  • #18
  • Nov 18, 2012 1:46pm Nov 18, 2012 1:46pm
Whilst I agree that the naked eye is a good way to see what the market is doing, I believe there is a tool/method that can enhance seeing what is going on.

The method is Auction Market Theory (AMT) and the tool is Market Profile.

AMT tells us that there are two states : balance (what you call chop) and imbalance (what you call trend). Most of the time the market is spent in balance.

Take a look at the chart below.

The focus here is on three lines- the developing value area, the developing value area high and the developing value area low. The shaded grey area is the developing value area.

When price is trading within these bounds, the market is in value and tends to trade from the value area high to the value area low. When the market is in balance, many market profile traders will simply buy the unfair lows and sell the unfair highs. But that is not what this post is about.

We don't only have to look at the developing value area, we can also look at the value area from the previous day, or days. In other words, price could range (balance) between yesterday's value area high and low.

If you want to know where a market is likely to be in balance (chop), why a market seeks to be in balance (chop) give Auction Market Theory and Market Profile a look.
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Without VSA, you're playing checkers while the Smart Money plays chess.
  • #19
  • Nov 18, 2012 8:13pm Nov 18, 2012 8:13pm
Quoting smikester
Great to see you posting again. Why not stay a while?
Been busy with other things. Living the dream. EA's running while I get to do what I want.

How are things your way?
  • #20
  • Nov 18, 2012 8:36pm Nov 18, 2012 8:36pm
Quoting magnumfreak
It's been a while since I posted on FF, I come around every now and then......
Hey magnum, good to see you man.

So then, my "indicator" to keep me out of chop is Multi-Pair Analysis.

If I'm watching Euro, I am always watching GBP and AUD as well.

I love it when all three are going in the same direction, meaning on lower timeframe charts, for session trades or daytrades that last minutes to hours, it's nice when everything is going the same way.
This could simply mean that the move is largely Dollar driven, but when things are going the same way they tend to move farther and smoother.
If Euro looks like it wants to go lower but Aud and GBP are clearly showing long signals, then it is more likely to see Euro chop instead of heading easily in its own direction. This is when I would take profit more quickly and wait for another setup, or move to another pair.

Of course it doesn't always work perfectly but for a "chop indicator"..... that is definitely the one I use.

And when things are going in different directions (Euro, GBP. Aud///USD), I may play Eur/Aud or just wait until one pair hits its resistance and then take a trade on another. To me it just beats sitting on a trade for a few hours that is just not going anywhere in a hurry (chop).
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