[BlowFish]

Originally Posted by edabreu »

How to avoid the chop.

Previously mentioned you need to identify yourself as a trader...are you a trend trader, counter trend trader, etc. I agree wholeheartedly.
However, what really is chop? Would you say a trading range of 5 points is chop? How about 3 points, or 2 points. When does it become chop for you?
Is this chop?

I would say no not in this 'time frame'. Imagine what a higher time frame (say 1 bar for every 5 bars on you chart) would look like. This shows a common and interesting characteristc of price movement. When price is clearly consolidating in a particular time frame a chart in 'the next lower timeframe' (e.g. *5 bars) will very very often be making beautiful trend runs back and forth across the higher time frames consolidation.

[daedalus]

A couple great ideas given in here.

I would second the idea of using rangebars to eliminate some of the natural consolidation in the charts.

Also, think about the natural indications of chop... what does it look like on a chart... typically its bars without large dense bodies, and lots of wicks, usually on both sides of the candle.

But the other thing I want to suggest is that you limit the time of day you take setups. The first hour and a half of trading there is a lot of movement right? Then this is a good time to look for setups because "chop" is unlikely when the market is moving and all of its players are taking positions. Midday... not as likely... and chop is more probable... last half hour - hour of the day can be big and directional but can also be complete crap... I avoid anything after 2:00PM CST. Basically I take signals from 9:00AM CST (First 30 minutes are a gamble IMHO) to 11 and from 12-2.

The last thing I would mention is this use of chop... I think we are talking (potentially) about different things here. You are using a squeeze indicator which means by definition you need the market to consolidate (ie chop) to give you a squeeze for a potential trade right? So what you are really talking about when you say chop is probably more "how can I avoid false breakouts without follow through?" And that... is probably a different answer than whats been given.

I think your best bet is to focus on money management and potentially skipping trades that signal beyond the prior swing high/low and trying to have a way to reduce risk as the trade progresses towards those natural areas of rejection and failure (if you are already in the trade).

Hope this helps.

Cheers!

[edabreu]

Identifying chop is easier for me on a range chart. I use a 6 range chart and I draw boxes when I see the bars tick up and down in a sideways pattern. When at key areas using simple drawing tools like trend lines and boxes helps me time my entries.

[waveslider]

I like Joe Ross's definition where if you have an "A_B_C" pattern in one direction that fails, then another "A_B_C" pattern in the opposite direction that fails in the same price range - price is locked in a range.

Best to see that on a higher time frame and do your trading one time frame lower.

[zdo]

Originally Posted by waveslider »

I like Joe Ross's definition where if you have an "A_B_C" pattern in one direction that fails, then another "A_B_C" pattern in the opposite direction that fails in the same price range - price is locked in a range.

Joe Ross also has a pretty good definition of price pattern congestions (ie it's codable) in The Law of Charts 'book' and it's companion article. Also has some techniques for RossHooking out of congestions - although, in-situ and pure / alone, those don't test out well.

Now if I had to choose just one desert isle indicator for identifying congestion for automated systems work, I would go with a 4 period JMA (using (H+L+C+C+C) * .2) for price input parameter) as the JMA tends to get flat quicker than any of the other adaptive central tendencies (like HMA etc.). If slope / angle goes flat two bars in a row, then in congestion.

hth

[simterann22]

Edabreu, I like your style. I am drawn towards scalping with the idea that every trade should begin as a scalp....and welcome the gravy if it comes your way. What fast MA are you using overlayed on your charts? HMA? JMA?

I've found trading the morning session with a 133 tick chart on the ES good. This small timeframe has been good to minimize stops. I've added to my trading using 3 different timeframes charts side by side to enable me to get a bigger picture. I've managed to catch breakouts by placing bracket orders outside of "small" congestion boxes.

BTW....thanks to all those who have left comments following my post.

[edabreu]

Originally Posted by simterann22 »

Edabreu, I like your style. I am drawn towards scalping with the idea that every trade should begin as a scalp....and welcome the gravy if it comes your way. What fast MA are you using overlayed on your charts? HMA? JMA?

I've found trading the morning session with a 133 tick chart on the ES good. This small timeframe has been good to minimize stops. I've added to my trading using 3 different timeframes charts side by side to enable me to get a bigger picture. I've managed to catch breakouts by placing bracket orders outside of "small" congestion boxes.

BTW....thanks to all those who have left comments following my post.

A 133 is too fast for me. I use a 6range/4range combo. I use a 10HMA. What matters is that you set up your charts and then spend some time looking at it and see if there are setups that are identifiable on a repeated basis that you can put some entry rules around and add some mm to it. Scalping does not imply fast. To me it implies precise entry to acquire first target 80% of the time.

[markl67]

[QUOTE=edabreu;67703]A 133 is too fast for me. I use a 6range/4range combo. I use a 10HMA.

What do you mean by 6 range/4 range combo? Thanks.