Choppy Moves - what are they?

A choppy move occurs when a market zigzags around without making a significant move in any particular direction. Choppy markets are best avoided by traders as it is likely that they will be bounced into and out of these markets without making any money.

When traders study price charts, they are usually looking for patterns or repetitive behaviour of some kind.

The mind plays strange tricks and the scale of the chart has a lot to do with how you interpret the movement of, say a closing price.

Most traders are day traders, which means they use daily prices and their trading routines are carried out once a day, after the prices for the previous day are available.

Their charts use daily time intervals, of course and this controls the scale. So to us, a choppy market will be one that zigzags around when viewed on a daily price chart.

Other types of moves are trending moves, where the price is making consistent progress in one direction or another and flat moves, where the price is remaining more or less static.

Most traders are trend traders and make money when markets are moving in a particular direction. At other times, these traders will prefer to stay out of the markets as there are no worthwhile opportunities.

Choppy moves are a problem for trend traders because they may appear to be trending, only to reverse direction and reveal their choppy nature.

The trader must make sure that his system will not be hoodwinked into following false trails too far.

 

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