Discussion: Concept of noise as a "choppy market" - other indicators besides TradingRush's? How is it different from "no trend" signal (e.g. in ADX)?

[Glefdar]

I came across this indicator by TradingRush which @kthomasking says he converted to ToS, and watched the video in his post a few minutes ago: https://usethinkscript.com/threads/trading-rush-choppy-market-indicator.7212/

The video claims that using this indicator raised a poorly performing study from about 23% win rate to about 34% win rate, and presumably the improvement could be significant also when using the "Choppy Market" signals for confirmation with a well performing study.

Has anyone seen a similar indicator concept used elsewhere, i.e. the concept of filtering out signal noise and improving signal confirmation by using a study that tries to assess how choppy the market is and discourages taking positions during prolonged stretches of candles that are calculated to be "choppy"?

I'm particularly interested in the conceptual side of what this indicator is doing. How is this really different from the ADX "no trend" reading or any trend indicator giving a neutral reading? Maybe the difference is that these neutral trend readings are based on trend strength directly, whereas "choppiness" is some property that could hypothetically be calculated in a manner that is independent from trend strength (e.g. in the case of an uptrend, choppiness being based on how erratic the candle highs and lows are within some range, rather than being based on whether there are higher highs and lower lows)?

I'm interested in the opinions of members about whether "choppiness" is a useful indicator concept to explore developing further. For example, if this really does improve the win rate, why not make a choppiness indicator that when a certain danger threshold is breached causes the chart background color to turn yellow (like a "don't take any trades" warning until the choppiness returns to more tradeable, safe levels again)? There should be some threshold at which the higher win rate increases profitability more than the missed trade opportunities of using such an indicator, and I suppose the threshold would vary a lot with the skill level of the individual trader using the indicator.

EDIT: Some interesting reading and another choppiness indicator in this thread here: https://usethinkscript.com/threads/choppiness-index-indicator-for-thinkorswim.1277/

EDIT 2: What's interesting to me is that Fractal Energy and Choppiness Index, while being calculated in different ways according to someone in this thread, give almost the same plots. But the TradingRush indicator's plot doesn't seem to have hardly any correspondence to FE or CI, at least not on a 1min time frame. So it seems to be a very different manner of approach for measuring and plotting choppiness.

 

[MerryDay]

@lmk99 Have you noticed that the TradingRush Choppy Indicator plots almost identically to John Carter's TTM Squeeze / TOS Squeeze?
The Squeeze (represented by the yellow horizontal line of dots in the lower chart) is based the narrowing of the Bollinger Bands / Keltner Channel ratio.

The Squeeze would be the superior indicator. Bollinger Bands drive the market due to their wide acceptance and given that they are part of the institutional trading philosophy. Well-accepted indicators have a self-fulling prophecy. The Squeeze indicates when an instrument goes into a period of consolidation. The thinking is that it will be followed by a period of expansion.
The Squeeze provides an overall broader picture.

I like @Welkin's Squeeze Clouds (purple clouds in upper chart) to give me a heads-up.

 

[Glefdar]

@lmk99 Have you noticed that the TradingRush Choppy Indicator plots almost identically to John Carter's TTM Squeeze / TOS Squeeze?
The Squeeze (represented by the yellow horizontal line of dots in the lower chart) is based the narrowing of the Bollinger Bands / Keltner Channel ratio.

The Squeeze would be the superior indicator. Bollinger Bands drive the market due to their wide acceptance and given that they are part of the institutional trading philosophy. Well-accepted indicators have a self-fulling prophecy. The Squeeze indicates when an instrument goes into a period of consolidation. The thinking is that it will be followed by a period of expansion.
The Squeeze provides an overall broader picture.

I like @Welkin's Squeeze Clouds (purple clouds in upper chart) to give me a heads-up.
View attachment 993

Interesting, thanks for explaining this and pointing me to Welkin's relevant work. He makes amazing stuff, I'm going to play around with it now. It sounds like for the purposes of measuring "choppiness" there are only two main approaches, that of Fractal Energy / CI on one hand, and that of squeeze bands on the other hand. Choppiness may be a conceptually distinct idea from consolidation but it sounds like mathematically, it's the same thing as consolidation in terms of how these indicators are defining and measuring it.

 

[Gellidus]

@lmk99 Have you noticed that the TradingRush Choppy Indicator plots almost identically to John Carter's TTM Squeeze / TOS Squeeze?
The Squeeze (represented by the yellow horizontal line of dots in the lower chart) is based the narrowing of the Bollinger Bands / Keltner Channel ratio.

The Squeeze would be the superior indicator. Bollinger Bands drive the market due to their wide acceptance and given that they are part of the institutional trading philosophy. Well-accepted indicators have a self-fulling prophecy. The Squeeze indicates when an instrument goes into a period of consolidation. The thinking is that it will be followed by a period of expansion.
The Squeeze provides an overall broader picture.

I like @Welkin's Squeeze Clouds (purple clouds in upper chart) to give me a heads-up.
View attachment 993

Hi Merry, Where do you get the TR Choppy Mrket on TOS?

 

[MerryDay]

Hi Merry, Where do you get the TR Choppy Mrket on TOS?

https://usethinkscript.com/threads/trading-rush-choppy-market-indicator.7212/

 

[Gellidus]

Thanks Merry.