I spent a couple hours yesterday trying out a new technique for identifying chop. I think this one might actually work. Need to look at a lot more charts, but here’s an example:
The indicator describes whether recent action is up, chop, or down. I’ve highlighted the chop areas on the chart itself to help you see how to read it. I really do think this has potential to be the best chop indicator I’ve seen. Not sure exactly how useful it is, though, because most turning points are identified as choppy until it’s clear that we are actually headed in a new direction. This means, most of the “best” signals (which are near turning points) get filtered out. Maybe I can make it optimistically guess that turning points aren’t chop… a sort of innocent until proven guilty thing. This would mean that it would take longer for it to tell you about choppy areas… but it may be a good compromise.
November 12th, 2007 at 1:37 pm
Richard,
Have you looked at the indicators from Jurik before? The have one called CFB that is a trending indicator, similar to what you seem to be looking for.
http://www.jurikres.com/catalog/ms_cfb.htm#top
November 12th, 2007 at 1:45 pm
I haven’t used the CFB, but other fractal-based chop indicators haven’t worked that well for me in the past. It’s another avenue I’m investigating, though.
November 12th, 2007 at 2:33 pm
I use a pretty simple indicator to identify chop in live market.. I have used it succesfully and by the time I see my setup in the making I can identify chop coming to an end with moving average changing directions.. check it out..heikinashi
[URL=http://img46.imageshack.us/my.php?image=31913249ml0.jpg][IMG]http://img46.imageshack.us/img46/6420/31913249ml0.th.jpg[/IMG][/URL]
http://img46.imageshack.us/img46/6420/31913249ml0.jpg
November 14th, 2007 at 7:01 am
I find the easiest way to identify chop is by looking at the angle of a trendline you can draw. Or as I refer to it as the “angle of attack”. No upward or downward angle? Your chopping.
November 14th, 2007 at 9:26 am
Thanks Dave, that’s kindof how I do it visually when I trade.