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ephi144

Detecting Sideways Market?

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My technique (for automation strategy) is to use multiple timeframe charts along with CCI.

 

Use a minute based candlestick chart as well as a range based chart. During a sideways period the range chart will exhibit strong sinusoidal qualities, you can use fourier or hilbert transform to separate the component waveforms and then evaluate the number of waveforms and their amplitude.

 

From there you should be able to identify a pattern that most sideways markets will have (it will likely be slightly different from instrument to instrument), then to calculate possibility of an imminent breakout compare the unfolding curvature with historical data for symmetry or lack thereof, also watch the CCI for impending bursts of momentum.

 

M. Leyton's work on Symmetry curvature duality and related topics can yield some interesting insights into how to efficiently evaluate an unfolding waveform

 

I get very good results using this method, of course you cannot predict the beginning of a sideways market with any accuracy but once one begins you can quickly identify and determine whether to sit it out or try to ride it.

 

Schaum's outline of signals and systems is your friend

(or any of their guides really)

:2c:

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Just an add to the first few posts hinting at 'just look', technically speaking:

 

A sideways market is when

 

- A trend is consolidating (in contrast to when a trend is reversing)

- The market is literally flat (its rangebound with very little price range)

- Its rangebound in some wave pattern (as dissected in the previous post)

? Anything else?

 

Just from looking at your chart adjusted to relevant timeframes, what is it doing?

 

For intraday trading at least, just looking can be very effective based on how volatile your market is on a particular day. Ive been finding that the european (and likely hang seng too) indexes on 'average' volatility days, visual inspection of the price ticks is great. As soon as the volatility lowers or increases you have to change out of easy inspection mode.

 

Another way of saying is perhaps any market at a certain volatility can be inspected for sideways or trending price patterns. Which opens a whole can of worms for days that arent trending just right..

 

ps. that post yesterday about pulling out compoent waveforms is pretty interesting. If i was more familar with maths, sounds like a good lead to derive something. But as with visual inspection (and probably every other trend identifying technique) works only in a specific set of cases.

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Yes, my technique focuses on the 3rd case you mention as it is used for algorithmic trading and this is the case which severely eats into the profit of most trend following automated systems.

 

When the market goes into a sideways pattern with significant amplitude the losses can add up very quickly if your algorithm cannot keep up. Also for instance in FOREX the spreads are usually much wider during these times which stacks the odds further against you. I tried monitoring the spread as a method of detecting sideways market but found that I missed too many good trends that occured during low volume times.

 

Another very simple method would be just to look at the times when a market usually goes sideways and restrict trading, but again you risk missing the occasional swings that occur at low volume and can be very profitable.

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detecting a sideways market is essential to traders and is always something difficult to learn...this is can sympthize with.

 

here's a tip...

 

use multiple timeframes to see the bigger picture.

 

take my trading style for example...

 

I trade a 1-minute chart, which means I need to use a longer term time frame to "zoom out" on the market and get the bigger picture to see where my potential trade falls within the short-term trend of the day.

 

I Use a 3-minute chart to get a better feel for the highs and lows of the last few hours of trading, which enables me to make sure i am always trading with the trend, and the support of the momentum in the market.

 

the most successful trade set-ups will typically occur outside of tradign ranges, in other words, when the market is trending, rather than sideways trading, so the ability to see the bigger picture will make sure you are only taking the trades that exceed the sidways chop.

 

Hope it helps!

 

Mav

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Doesn't that just shift the 'problem' to the 3 minute chart Mav? How do you define trend on your 3 min? Just curious.

 

Of course if you can determine trend one simple definition of sideways movement is absence of trend. :D

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Ive attached a snapshot of my charts from today that illustrates what a sideways market might look like.

 

I also did a short video on this for you guys to better-illustrate what im trying to say here.

 

Below is a video that i added to this forum:

 

 

TL! Videos

 

 

Hope it helps guys!

 

Mav:)

SidewaysMarket.thumb.jpg.87b0ec1d6e92326935a46ffc217b49af.jpg

Edited by Soultrader
embedded video link wasnt needed

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Excellent, professional presentation !

Just a note - Volume has always been difficult for me - it is so noisy - I am using Williams A/D with a 23 period MA and that seems to work also - the MA goes flat in a sideways market

( A/D w/MA idea courtesy of Psb67 )

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ephi,

 

lag and responsiveness are issues with regular averages but this principle works well with some of the more adaptive MA's. For example, Jurik, etc. set to 4 periods on a low timeframe ndx chart gets flat quickly enough to be useful in algorhythmic trading.

Have you looked at Joe Ross's definitions of congestion found in Law of the Charts book(s)? These are also easily coded.

 

hth,

 

zdo

 

Just came across this posting. With the "Purple Zone" indicator used in NeverLossTrading, you have the opportunity to spot when a sideways move is initiated. The challenge is: How long will it last. Hence, we mostly propose to beginners, not to trade in a "Purple Zone". Surely, we also provide advanced trading strategies, which allow trading inside the "Purple Zone". Check out our posting at traderslaboratory: How Do You Know In Advance That The Market Moves Sideways? - TL - 14817

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... With the "Purple Zone" indicator used in NeverLossTrading, you have the opportunity to spot when a sideways move is initiated. The challenge is: How long will it last. ...

 

Across time, experience has ‘learnt’ me that how long it will last should not be considered the most important characteristic when a trader is starting to work with “sideways” markets. Identifying when congestion is beginning is far more important information than is when it will end. ( not that "when it will end" isn’t important, btw)…

In my cursory glances at your posted screenshots your Purple lags "when a sideways move is initiated" by far too many bars to be considered a fine tool.

 

ie re the topic of congestion, folks – “Keeping it simple” won’t work well enough.

 

Typical mistakes are

>In their perceptual ‘mapping, some chronically mistake a what they label as a ‘sideways market’ with congestion, etc. etc....miscategorization of small swings as congestions, confusing ‘trading ranges’ with congestions, etc. etc. …

> then in authentic congestions, insufficient depth in differentiating different types of congestions

These are signs that the work has not been taken to a sufficiently granular level.

 

NLT, not really trying to hurt your cause here – Your indicator is better than nothing. At least it doesn't appear to be making the first 'mistake' listed above.

…more just trying to help and keep it real for those just getting into learning to manage their own potential in the congestion aspects of trading.

 

One more time ... Most traders who choose to take on mastering "sideways" and then go with a "keep it simple" mindset are hurt more than they are helped - period.

Edited by zdo

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Across time, experience has ‘learnt’ me that how long it will last should not be considered the most important characteristic when a trader is starting to work with “sideways” markets. Identifying when congestion is beginning is far more important information than is when it will end. ( not that "when it will end" isn’t important, btw)…

In my cursory glances at your posted screenshots your Purple lags "when a sideways move is initiated" by far too many bars to be considered a fine tool.

 

ie re the topic of congestion, folks – “Keeping it simple” won’t work well enough.

 

Typical mistakes are

>In their perceptual ‘mapping, some chronically mistake a what they label as a ‘sideways market’ with congestion, etc. etc....miscategorization of small swings as congestions, confusing ‘trading ranges’ with congestions, etc. etc. …

> then in authentic congestions, insufficient depth in differentiating different types of congestions

These are signs that the work has not been taken to a sufficiently granular level.

 

NLT, not really trying to hurt your cause here – Your indicator is better than nothing. At least it doesn't appear to be making the first 'mistake' listed above.

…more just trying to help and keep it real for those just getting into learning to manage their own potential in the congestion aspects of trading.

 

One more time ... Most traders who choose to take on mastering "sideways" and then go with a "keep it simple" mindset are hurt more than they are helped - period.

 

@ZDO: The "Purple Zone" is a very strong indicator and works for me and other traders twofold:

 

1. Alarms that an underlying entered into a congested area where counter price moves can be expected: Already this helps a lot of NeverLossTraders to: Stay out of trades, when it is dangerous to be in. Or you take protective measures when you stay in a trade.

 

2. At the end of the "Purple Zone", It alarms you for a directional trading opportunity, - if one exists -, with a clearly spelled out price threshold and a defined target move.

 

The indicator provides a 80% accuracy and beats everything else I have seen in the markets so far.

 

If you just trade the end of "Purple Zone" indicator for what we call 1-2 Speed Units, you have a very powerful trading system on hand, while it part of packages with other indicators which provide more directional trading opportunities.

 

Hence, you are ahead of the game and not a retrospect master with the NLT Purple Zone indicator.

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