Filtering Sidemoving markets

[minx]

Hi, I was looking for a bit of help with indicators that are useful when trying to filter out trades in a sideways moving market, I've tried designing a trend catching system but am finding that rangebound mkts are causing huge drawdowns and a good deal of emotional stress too!!
Thanks for your help

[Gavishti]

You may want to look at the ADX. It will not tell you direction. Instead it indicates strength of trend. Be sure to read up on the instructions as it works differently than a lot of indicators. You may need to adjust the parameters to find what works for your style. As a comparison bring up two instances on a single chart. One with the default settings of 14, 14 and the other at 13, 5. Experiment until you find what works for you. You will find it in the Directional Movement indicator. The DI portion is more at direction of trend. You can couple these with something like MACD to find turning points. Again, you should read up on the instructions and experiment with settings. Try 8, 15, 11 or 8, 25, 15 compared to the default to get you started. Instead of looking at crossovers on the MACD try looking at the combined direction of the MACD and HIST. It may help to understand that the MACD is price velocity and that the HIST is price acceleration. In the long run you will just have to experiment with a lot of indicators until you find the ones that fit your style of trading. Hope this will be of some help.

[minx]

Cheers, really like the ADX/DMI, its filtering out a lot of chaff that was causing a few nasty whipsaw drawdowns. Not finding the Histogram too useful yet but prob dont understand enough yet.
Thanks for the help

[Gavishti]

The histogram is the ADX. It indicates the strength of the trend. When it is rising the trend is strong. As it drops off the trend is weaking. Direction of the trend can be seem by the DI and other indiators. Or the price bars. A low flat ADX reading generally precedes a large breakout.