|
PureBytes Links
Trading Reference Links
|
J.P. Oliver wrote:
>
> Paul Cote wrote:
>
> Realtraders:
>
> I would like to know if anyone has a method for determining
> or
> evaluating the choppiness of the market in order to
> determine a
> choppiness index. This will be to switch the trading system
> from say a
> volatility breakout to a trend following system when a
> strong trend
> comes underway.
>
> Dear Paul:
>
> Robert Barnes published a volatility index called "Directional
> Relative Volatility" in his book Trading Choppy Markets, Richard D.
> Irwin Publishers, 1997. This is the "choppiness index" I think you're
> looking for. I confess that I have been unable to utilize it myself
> because I cannot yet quite grasp the practical application (makes me
> feel a bit dense, but I'm still working on it).
snipped
Isn't this just another attempt to find a holy grail indicator ?
Say your indicator says the market is now "choppy". Is it also going to
tell you what is going to happen next ? Will the market start to trend
tomorrow? next 4 trading days ? If not it is not really of any practical
use. By this I mean it does not "add" anything that you did not already
know with respect to what "might" happen next.
It may be a 3-5 day ABC correction or ABCDE or an x day sideways market.
One just does not know.
Any other thoughts ?
|