Using Momentum Indicator to identify chop zones
If you are a short term scalper, then chop zones can be your bane and take all your profits. Using the Momentum Indicator, you can identify the propensity for chop zones early by adding some trend lines.
The Momentum indicator starts with the assumption that as the chart line moves towards zero, the more choppy and less momentum the market is moving. However, we need some guidelines to identify thresholds above and below zero for choppy areas. Using July 1st as an exemplar, I have plotted chop zones that correlate with the momentum indicator. In this particular case, I added trend lines at 0.15, 0, and -0.15 as prime chop zones. When the indicator is in this range, it is best to wait for breakouts if you are scalping. Try this method on your own charts to identify prime chop zones and tweak it if necessary. However, I plan on using these chop thresholds going forward.
The Momentum indicator starts with the assumption that as the chart line moves towards zero, the more choppy and less momentum the market is moving. However, we need some guidelines to identify thresholds above and below zero for choppy areas. Using July 1st as an exemplar, I have plotted chop zones that correlate with the momentum indicator. In this particular case, I added trend lines at 0.15, 0, and -0.15 as prime chop zones. When the indicator is in this range, it is best to wait for breakouts if you are scalping. Try this method on your own charts to identify prime chop zones and tweak it if necessary. However, I plan on using these chop thresholds going forward.