Tuesday, September 22, 2015

Trading a choppy day

A choppy market is characterized by bars with large tails, occasionally interspersed with overlapping, opposing bars with large bodies. Its clear that the opposing bars are effectively a tail if you consider them in the aggregate.

Capturing large moves in this price action is very hard to do with a tight stop. The large move down from b3 only occurred after deep pullbacks and stopped me out.

There are ways to predict a breakout such as b29 but these are very hard to read. One way to keep yourself out of trouble is to wait for price action to be less choppy, i.e, you start to see more trend bars and less overlap.

If you must trade, deep pullbacks to the trendline are the safest and three push pullbacks are generally safe. Note that in choppy markets, you should always take an early profit and swing entries are hard to gauge.

Often, the mark of the successful trader is that he knows when the odds are against him and knows to sit out of the market when his expertise is not called upon. The trader who frets at missed opportunities is well advised to weigh against the missed losses and be content with making the right choice of staying out of the wrong market.

No comments:

Post a Comment