How to recognise, that the sideways market is starting?
I have observed one rule, but I'm not 100% happy about it:
* if none of two consecutive Stoch(14,5,5) swings reaches 80/20, then sideways market could be starting.
Would be happy to learn what other traders are doing.
Okay well you could try to do the opposite and look at the markets that are trending the most, because sideways markets aren't really useful due to lack of definite trend.
There's two approaches, one is to examine all trends and filter for the largest movers, the other is to take a sideways channel, add a threshold above and below the highest high and the lowest low of nth period (bars) and wait for a breakout to occur.
You do not have to enter immediately, you can also wait for confirmation because once it gets going you will see multiple breaks to make it more clear you can have for example X day's of no signal at all and then when the action starts you will see multiple new levels by the minute.
When it's just a level tester it will give some alerts and then drop back into ranging, but when it really breaks through, you can really see consecutive break after break while adjusting your levels.
A good system filter uses audio because the interval of sound can be extremely revealing when it comes to market activity, whereas just looking at the charts from time to time is, well let's say less invasive, thus easier to discard.
Okay well you could try to do the opposite and look at the markets that are trending the most, because sideways markets aren't really useful due to lack of definite trend.
There's two approaches, one is to examine all trends and filter for the largest movers, the other is to take a sideways channel, add a threshold above and below the highest high and the lowest low of nth period (bars) and wait for a breakout to occur.
You do not have to enter immediately, you can also wait for confirmation because once it gets going you will see multiple breaks to make it more clear you can have for example X day's of no signal at all and then when the action starts you will see multiple new levels by the minute.
When it's just a level tester it will give some alerts and then drop back into ranging, but when it really breaks through, you can really see consecutive break after break while adjusting your levels.
A good system filter uses audio because the interval of sound can be extremely revealing when it comes to market activity, whereas just looking at the charts from time to time is, well let's say less invasive, thus easier to discard.
My point is - when trading in trending markets, you always enter a bit "late": price is always already beyond a baseline (midline of Bollinger Bands for example), but this is fine, since the price goes on. But if you enter when price is beyond that baseline in sideways market, you lose the trade very fast. And the next one, and the next one, if you're still thinking this is trading, not sideways market. Beyond the baseline is way too far in sideways market. It would be better to not enter these trades. That's where my initial question came from.
Why Stoch? In downtrend, each swing low is accompanied with Stoch below 20. So when you see a swing low and Stoch is higher than 20, a downtrend has probably finished. So if you get two consecutive "unfinished" Stoch swings, you've got yourself sideways market.
But it is not perfect. Looking for something better.
Fundamentals will help, too. The further away from past high impact news and the closer to high-impact scheduled future high-impact news (especially the big ones, like elections, non-farm payrolls, interest rate decisions...), the lower the volatility will be obviously. The time of day? Holiday season? ... Indicators are the least important part of the whole picture. Low volatility and staying in a range of course isn't the same, but they are often associated with each other.
Fundamentals will help, too. The further away from past high impact news and the closer to high-impact scheduled future high-impact news (especially the big ones, like elections, non-farm payrolls, interest rate decisions...), the lower the volatility will be obviously. The time of day? Holiday season? ... Indicators are the least important part of the whole picture. Low volatility and staying in a range of course isn't the same, but they are often associated with each other.
No fundamentals please. Just TA.
Maybe you can try Bollinger band shifted.
BB period 14 shift 10 Deviation 3 or 4
BB period 14 shift 20 deviation 3 or 4
or whatever setting you like
inside is the range, outside the bands is the trend (or could be)
it is necessary to automate your trading strategy
Yes, I'm trying to automate it.
Maybe you can try Bollinger band shifted.
BB period 14 shift 10 Deviation 3 or 4
BB period 14 shift 20 deviation 3 or 4
or whatever setting you like
inside is the range, outside the bands is the trend (or could be)
Thanks. Do you have an image illustrating that?
I cannot imagine how this should work...
The best way to detect when sideways starts is to use envelopes, at a medium period (10,20 but it depends). It can seem to be banal, but it's one of the easiest/effective method, in fact when a range market is starting, envelopes slope starts to decrease going flat and price moves inside the envelopes, instead when it is trending price is outside the envelopes...
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I have observed one rule, but I'm not 100% happy about it:
* if none of two consecutive Stoch(14,5,5) swings reaches 80/20, then sideways market could be starting.
Would be happy to learn what other traders are doing.