Chop Suey can be Sweet and Sour

I just love Chinese food. Before the great Oriental immigration to Australia that started after 1973, I'd been known to stop in Hong Kong overnight to eat Chinese. Now, you have some of the best Chinese and Thai food in and around Sydney.

Anyway, CHOP. You are in CHOP when you see  horizontal EMAs and greatly overlapping range bars. When this happens, I go into Outside In mode. Outside in mode is when I look to fade any move, small as it may be. I don't change the way I trade, but I put more emphasis on other parts of the picture. Momentum and VB are the main features. I'll try and trade away from the EMAs looking for the market to go back there.

If the volatility of the market you are trading drops, you have a number of choices, including:

1. Trade bigger size with tighter stops and closer targets
2. Trade Outside in trades only, fading the moves or picking tops and bottoms (these are usually lower probability trades)
3. Switch to a similar market with a larger daily range. An example of this could be switching to the DAX from the ES

As a trader, my job is to trade within the context that exists. I must fit the trade to the context rather than hope that the context will support the trade. The concept of envisioning what is going on is very important as it helps identify for me which mode I should be in. It's a natural part of my mental check at the close of each range bar. This has become part of my "muscle memory" and my win rate would be hugely less without this activity. It's like driving a car and knowing where you are.

You can use a few tricks to help you. The chart below shows an indicator - the 4th pane, the one below the VB, consolidates a lot of my rules into a red, yellow and green indicator that makes it quicker to see everything and not forget. As I get better at RTL I'm doing the same in MarketDelta.