WEBVTT 00:03.810 --> 00:11.400 In this video, we're going to take a look at choppy markets and how to deal with them really so a choppy 00:11.400 --> 00:18.000 market is something that you should be very comfortable with because quite frankly, it's the norm 80 00:18.000 --> 00:25.350 percent of the time, 75 percent dependent on the instrument markets are doing this as opposed to this. 00:25.410 --> 00:29.380 Now, you notice I'm on a five minute chart, so I'll go ahead and zoom out. 00:29.400 --> 00:36.050 This is more of a day trading thing, but it can apply to longer term charts as well. 00:36.480 --> 00:38.130 But a day trader is. 00:40.160 --> 00:45.890 By their very nature, going to be hyperactive as far as trades are concerned. 00:46.160 --> 00:49.620 So there are a couple of indicators that you can use to perhaps help. 00:50.090 --> 00:57.140 One would be the stochastic oscillator, and this indicator measures when something is ever bought or 00:57.140 --> 00:57.560 sold. 00:58.860 --> 01:03.600 Ultimately, you want to define where support resistance may be. 01:06.520 --> 01:08.200 And simply trade back and forth. 01:09.160 --> 01:15.550 However, one thing that I would point out is that you almost always have. 01:16.470 --> 01:24.540 A prevailing trend ahead of time, most of the time, the expression is consolidation leads to continuation. 01:25.490 --> 01:26.120 So. 01:27.650 --> 01:33.410 The way that I deal with this is I will take a sarcastic oscillator, you know, once we start forming 01:33.420 --> 01:35.360 and there should have been support there, there was a gap. 01:36.660 --> 01:37.950 Once we get this. 01:38.940 --> 01:42.640 It's a classic cross, the moving averages cross underneath. 01:44.200 --> 01:49.660 In this case, the 20, which is the oversold you're looking to buy, and once you get into overbought 01:50.110 --> 01:52.960 and cross, which is above 80, you're looking to sell. 01:53.440 --> 01:56.020 Now, here's the thing. 01:56.650 --> 01:59.470 The longer term trend in this case was up. 02:00.440 --> 02:04.010 So you're going to have much more luck buying. 02:04.040 --> 02:05.760 So how do you manage that? 02:06.080 --> 02:12.800 Well, if you really must trade in both directions and quite frankly, I don't recommend it, I recommend 02:12.800 --> 02:15.830 just looking for support and going to the longer term. 02:17.310 --> 02:22.890 Trend, because eventually you break out of this, but leaving that alone, if you feel that you ultimately 02:22.890 --> 02:23.760 must do this. 02:25.070 --> 02:33.590 A simple trick that I have used for money management has helped me over the longer term, so I take 02:33.590 --> 02:35.000 this to Karthick Oscillator. 02:35.570 --> 02:36.860 I use that as a signal. 02:38.490 --> 02:45.510 On with trend trades, I risk a whole unit, so. 02:46.550 --> 02:49.940 Whatever that is, you know, let's just say I risk one percent of my account. 02:54.610 --> 02:56.650 Not with trend. 02:57.860 --> 03:02.000 I was, but not with her in here, I'll risk. 03:03.230 --> 03:04.310 A half a percent. 03:05.990 --> 03:06.950 So what happens? 03:08.180 --> 03:14.030 This gives us the opportunity to perhaps walk out of here. 03:15.720 --> 03:21.990 With a little bit more clarity, you can see that we board here, we hit resistance, got oversold. 03:22.500 --> 03:25.790 So at that point you've got a one percent trade that worked out. 03:26.580 --> 03:27.900 But watch what happens. 03:28.020 --> 03:30.360 You know, you're half a percent goes against you. 03:31.290 --> 03:33.510 So, you know, now you're down. 03:35.080 --> 03:36.670 To only a half a unit. 03:37.610 --> 03:41.090 Of profit, and it's actually not even quite that, it's more like 45 percent. 03:42.660 --> 03:47.370 You get an oversold condition just above support. 03:48.500 --> 03:51.710 And you could have closed out there for an entire move. 03:53.200 --> 03:56.950 So then you're at one and a half trades units, if you will. 03:57.520 --> 03:59.620 So you've made money by going with the trend. 04:02.440 --> 04:09.130 Had you shorted here, not ahead of the resistance, that would have been a loser and you'd be covering 04:09.130 --> 04:09.600 your trade. 04:10.000 --> 04:12.250 A couple rules are this. 04:12.250 --> 04:17.080 If you get the think about trading choppy markets like this, if it proves you wrong. 04:17.320 --> 04:22.480 So, for example, you shorted right here and it gapped up there, get out. 04:22.630 --> 04:27.460 You absolutely must get out, because a lot of times these can lead to much bigger moves, as you see 04:27.460 --> 04:27.760 here. 04:28.570 --> 04:34.930 So let's go ahead and take a look at letter X here on the day and see if we can identify something similar. 04:37.180 --> 04:42.100 So the daily chart, you know, same thing, we're just kind of shopping around here, we kind of begin 04:42.100 --> 04:46.420 to form a little bit of an area of choppiness, consolidation. 04:46.420 --> 04:47.370 That's really all it is. 04:47.980 --> 04:49.870 You get a cell signal here in the stochastic. 04:50.110 --> 04:51.820 You recognize that this is support. 04:52.090 --> 04:54.460 You get out there, that's your half. 04:54.760 --> 04:57.610 Because longer term, we have been going up. 04:59.420 --> 05:02.810 You get across here, but not a signal, so you literally. 05:04.580 --> 05:07.040 Only get this entry to the upside. 05:09.430 --> 05:14.500 As we cross there and you get your once you got one and a half trades now. 05:15.570 --> 05:21.180 Eventually, you get this cross, it's in the middle, like I said, and that's not a valid signal, 05:21.190 --> 05:22.460 that's a 50 50 ball. 05:23.340 --> 05:25.190 We do break above and we gap higher. 05:25.200 --> 05:28.250 Well, now becomes an entirely different set of circumstances. 05:28.890 --> 05:34.740 So you've picked up one and a half wins while the market was shopping and then you continue to go further. 05:36.330 --> 05:43.140 Let's go ahead and just for the sake of argument, let's do Wal-Mart and see if we can find a nice shopping 05:43.830 --> 05:44.820 time in the market. 05:49.100 --> 05:51.590 So you can make an argument for this. 05:53.270 --> 05:56.150 Being HRP, time of the market. 05:57.590 --> 06:01.370 But even that is a little suspect because it's more like an art. 06:02.560 --> 06:08.470 So you do need to recognize that basically what you're looking for is something that's definable because 06:08.470 --> 06:13.900 you can't define the support, the resistance easily, that's not a good sign here. 06:13.900 --> 06:16.690 You had an area where, you know, we had been rising. 06:16.690 --> 06:17.830 You had a buy signal here. 06:18.610 --> 06:19.780 It hit the resistance. 06:19.930 --> 06:26.350 You had another close to a buy signal here, which you could have taken, I suppose, if you use a little 06:26.350 --> 06:27.370 artistic license. 06:27.370 --> 06:29.380 But you can see we broke out and went to the upside. 06:29.380 --> 06:34.820 So you had one percent and then you had a completely different trade and that a repeat on and on. 06:34.840 --> 06:40.690 So by all means, choppy market strategy, pretty simple, really comes down to money management. 06:40.690 --> 06:44.200 You'll hear a lot of you know, you can use this indicator and you can use that indicator. 06:44.200 --> 06:48.250 I just like using an oscillator that shows over about a year or so and you can use RSI. 06:48.250 --> 06:49.000 But I found this. 06:49.000 --> 06:53.290 The classic oscillator tends to work a little better in sideways markets.