sefstrat

Edited: Double Post

Yes, my technique focuses on the 3rd case you mention as it is used for algorithmic trading and this is the case which severely eats into the profit of most trend following automated systems. When the market goes into a sideways pattern with significant amplitude the losses can add up very quickly if your algorithm cannot keep up. Also for instance in FOREX the spreads are usually much wider during these times which stacks the odds further against you. I tried monitoring the spread as a method of detecting sideways market but found that I missed too many good trends that occured during low volume times. Another very simple method would be just to look at the times when a market usually goes sideways and restrict trading, but again you risk missing the occasional swings that occur at low volume and can be very profitable.

My technique (for automation strategy) is to use multiple timeframe charts along with CCI. Use a minute based candlestick chart as well as a range based chart. During a sideways period the range chart will exhibit strong sinusoidal qualities, you can use fourier or hilbert transform to separate the component waveforms and then evaluate the number of waveforms and their amplitude. From there you should be able to identify a pattern that most sideways markets will have (it will likely be slightly different from instrument to instrument), then to calculate possibility of an imminent breakout compare the unfolding curvature with historical data for symmetry or lack thereof, also watch the CCI for impending bursts of momentum. M. Leyton's work on Symmetry curvature duality and related topics can yield some interesting insights into how to efficiently evaluate an unfolding waveform I get very good results using this method, of course you cannot predict the beginning of a sideways market with any accuracy but once one begins you can quickly identify and determine whether to sit it out or try to ride it. Schaum's outline of signals and systems is your friend (or any of their guides really)