Wednesday, November 30, 2011

Here's an Idea on How to Keep Out of Choppy Markets

"It is absolutely necessary to have an edge."

Jack D. Shwager
The New Market Wizards: Conversations with America's Top Traders [Paperback] 1992

Wouldn't it be nice if you could get money to flow into your head continuously? Or else, maybe I could get ideas that would make me money all the time - instantly.

I found that really cool gif on the microsoft office clipart site while I was looking for free images for the blog. Kind of apt for us currency traders, don't you think?

For the last 2 years or so, I have been looking for something that will let me know when not to enter into a trade. And believe you me, I have tried a lot of tools and indicators. And read a whole lot of books. 

Since taking the Bossilator course - I have been using the Bossilator to time my entries into the market. Rob Booker's rules for trading with a trend is that the Bossilator reading must reach at least 200. For counter trend trading, it's 400 - 500. That's the number of bars away from the SMA800.

By nature I am a counter-trend trader. And 400 - 500 is a really hard number to wait for if you have the whole trading day in front of you. That's about 7 hours (using a 1Min chart as base measure) of nothing to do during most of my waking hours. Assuming of course the Bossilator is zero or maybe around 50 to 100 at the start of the day.

By nature, I am quite impatient. Which is why I am still trading the 1Min charts. 

Sometime in the middle of last month, I decided to change my spots and try trading with the trend. That way, I will only have to wait 200 bars. (Bossilator at 200). Even then, I am still trawling the apartment looking for something to do, to keep my mind active. Did I also say that I have since become an excellent cook?

But here's the cool thing I found by accident, while I was on the trend-trader's journey. Well, it may have been self-explanatory, but these seeds take awhile to take root in my dense brain. While waiting for the Bossilator to reach 200, I noticed that, when it was in range mode, it would criss-cross the SMA800. And do what looks like a double-helix dance. The highest high would be between about 30 to 50pips. Then it'll just get magnetized back to the SMA800.

I've marked it on the EURUSD chart below. So what's the big deal?

Well, when I see this double-helix dance around the SMA800, that's my cue NOT to TRADE!!

Yes, seriously,  Bossilator is keeping me out of trades which don't have enough momentum. And that is a good thing! I went back to analyze my worst trades. Guess who loves to trade break-outs on a choppy market. And get clobbered. Yes, yours truly.

I really like using The Bossilator this way. Check it out, just draw the SMA800 on your charts and take a look-see.

Happy Trading!