Sunday, February 1, 2015

What is a choppy market

Choppy markets are the biggest threat to orderly trading. Traders know there are two market trends: Up and Down. When a clear trend is available, trading becomes easy and simple: go with the flow.

But, what happens when there is no clear trend? The absence of a trend is considered as a sideways market. In a sideways market once traders realize that markets are sideways, support is bought into and resistance is sold into. While trading is not as easy as it is in trending markets, at least there is a pattern.

The problem comes when markets are choppy and volatile.Choppy markets keep on changing between different states of trend, They are like a chameleon. A choppy market is actually an up, down market and then suddenly changes into the reverse. Soon after, the market changes again from up to down or down to up. In this way, the market misleads traders repeatedly.

A choppy market cannot be traded by any method. Surprisingly, many newcomers actually make money in choppy markets! This happens because they take trades without much thought and with considerable risk. In a choppy market, suddenly, their losing trade becomes profitable since the trend changes rapidly. It is another matter that newcomers end up losing all the gains and much more when markets become orderly and trending.

To sum up: A choppy market is a market condition in which trend changes rapidly and without any proper technical pattern. These changes keep on happening, causing the trader to lose on almost every trade he takes.


Vibhor Jain said...

Beautiful article, i fully agree. To add - even in a trending market , there could be a number of stocks which are choppy !

Jitesh said...

dear sir, Kindly let me know any book, article in detail on how to determine trend and change in trend in between all time frames - short, intermediate and long term. And how do you kind of place targets and stops for change in trends - long to no trade to short in the market and vice versa. thanks

deepak sahu said...

I just read through the entire article of yours and it was quite good. This is a great article thanks for sharing this informative information. I will visit your blog regularly for some latest post.

MCX Gold Tips