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An indicator which can help to identify side periods and also trends quite quickly is the Supertrend;
Here you can see (on page 9) a chart with the Supertrend and its formula:
Here is my version of a TradeStation/MultiCharts EasyLanguage SuperTrend indicator.
I made it a function so it could be called easily from a strategy.
Function:
// SuperTrend function
// March 25 2010
// Big Mike
inputs:
ATRLength(NumericSimple), …
Another indicator that can confirm the presence of a sideways phase (low volatility) or a trend (high volatility) is the ADX.
Adaptive moving averages can also help you understand when the Market is in a sideways phase (when they are horizontal) or in a trend (when they are tilted).
ADX is an interesting indicator to measure the strength of a trend or side phases and it is easy to insert it in a Trading System code, example: and ADX (14)>30 then... (or: and ADX (14)<30 then...);
it is also worth trying to invert the values, as suggested in this T.S. (the explanation is in Italian but it can be easily translated into English by selecting the language):
Here is a video of one of the teachers of the Unger Academy in which he demonstrates with a code in easylanguage, that using the ADX in a different way from the classic Welles Wilder, you get better results (maybe with Google you can find the video in English):
I have to say that, if you have this and if it is reliable, you will soon become a very, very wealthy trader. This is something that would answer all trading questions, basically.
There are some indicators or other tools that attempt to do this, and perhaps they can be put to use in assessing the status of the market to some degree. But is there something nice and simple that you can download, that will reliably give a straightforward verdict that you can count on? Alas, probably not.
I don't think you should be expecting an indicator to solve this question. It would be great if it did, certainly. But everyone is working on trying to answer the questions of what is the present character of the market (what is it doing?) and what will be the next profitable trade (what should I do?). This is really the whole issue in trading. One version of these questions is the one you ask. An indicator is not going to just hand you the solution. Trading is just not that simple.
Sorry. And believe me, I really am. I would love to have it, too.
Bob.
When one door closes, another opens.
-- Cervantes, Don Quixote
If it helps you, you could try the function: ChoppyMarketIndex, made by George Pruitt in his book:
Building Winning Trading System with Tradestation -2a ed, which was reported here:
A few years ago, a friend of mine told me that to get the signals of the Trading System: Dynamic Breakout II, in the window: Format Analysis Techniques & Strategies (Properties for All label), you have to write: 1500 in the voice:
Maximum number …
