When you have a market that trades like this one it’s time to dust off the stock trading systems cabinet, pull out the oscillators, and forget moving averages and other trend following indicators.
I like the Stochastics %K to trade a choppy market. Try reducing the time periods from the standard 14 to 8. Find a security that is pinging back and forth — I like the index ETFs.
Here’s the system: take only the most oversold %K readings and go long a few pennies above the corresponding price bar’s high. The traditional overbought oversold levels are the 80/20 for the Stochastics. Here’s an example using the IWM (Russel 2000 ETF) –
Keep trying to enter a few pennies above each bar –
Finally, after four tries the buy order is filled. Trail the stop at the low of the previous bar.
Rinse and repeat — works great on a lesser time frame, just make sure there is enough profit to make it worth your time.
Keep trading this system until the market starts to trend, either up or down, and then it’s time to use a trending system.
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