The ACD Method

Quote from mdl060374:

It says May on the sheet.

Anyway, I found it strange that some of the cheaper stocks were listed.

I agree with Maverick's earlier post about equities being a challenge with ACD. Looking at alot of them, they run up/down at the open, and then chop/retrace. There doesnt seem to be alot of opportunity, or waiting for confirmation. Even with a 5 min OR.

Does anyone have any advice for product selection when it comes to stocks? To me, studying past behavior (frequency of ADR being a minimum %) seems good. But I am kind of stumped on this.

From looking at the majority of stocks, my inclination is to say trading failures (wider A levels, and underlying OR) is the way to go. But this kind of goes against the nature of ACD primarilybeing a trend following system I know he says that sufficient liquidity and volatility are the requirements, but it doesnt seem enough to cull down your universe.
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You know what, I've def noticed a mean reverting tendency in alot of stocks. I forward tested a breakout system with ACD and it kinda confirmed this. This even was the case in many news stocks that I was playing. I noticed a very strong tendency to hit my max stop...I used time stops so I got some small losers and scratches, so it saved me from taking them. If I didn't use time stops many of them would have came back.

Some Ideas for playing failed A's that I've noticed, Wide OR's relative to ATR, indecision(chop), moves into A-levels with little retracement. Those grinding trend moves, will chop you up and don't provide the best opportunities in either direction...so watch out for that!
 
Quote from baggerlord:

In case that was still confusing the idea is to find stocks that on average have the most move left after hitting an A level, however you choose to calculate it.

Oh and that last point you made about prefering to trade A failures, is just style preference as Maverick has pointed out. If you wanted to trade failures you might want to sort stocks by ones that on average will have the least movement left after a level breakout based on ATR.
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Yea pretty simple, look for those stocks that have some room to go before hitting their ATR's. Regardless, unless you have traded based on these principles you can't really say anything. If you can identify those stocks that are likely to have follow through(news, earnings, order flow) then you are set! The thing is, that requires alot of experience with watching the tape and knowing what will move.

If one is noticing a mean reverting tendency in the momo and news stocks that they are playing, why not take advantage of it and trade it? If you actually look for stuff that might be stretched, you should find some stocks that are even better candidates for those type of trades!
 
Quote from Shanb:

I have not been able to get snywhere with stocks just yet, very interested in futures though

I am listening, if you have specifics to look at w/ futures!!

Has anybody done any testing with the significance of different A-values?

I am amazed by how often stocks will move into A-levels and it will mark the top/bottom of that move. The moves that grind into the a levels don't hold this same type of reaction. When you get those momentum and large spread move into these levels they offer great reference points. Some times you have a stock go right through levels and other times you will get a nice fade opportunity after a failure.

IMO there is a statistical significance to these levels, this happens way too often to just be an arbitrary line!

Using a constant time for the OR along with a constant A value percentage, creates an adaptive volatility band or something that is adjusting dynamically to market volatility. When volatility(ATR) expands, the a-values and opening ranges change accordingly.

Definitely interesting stuff the more you work with it.
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OK, I'll throw out a bone here. For stocks, the best way to look for good confirmed A ups and A downs is to look for narrow open ranges. You want to program this into a ratio. Take the OR into say a 30 day ATR. Then run the scans during the day to find the tightest ratios, for example all stocks under 20%. From this list, you look for confirmed A ups and A downs. Combine that with stocks with narrow pivots or narrowing pivots, and you will find your breakouts.

To further add to this, you can do the same process with stocks using a 30 min OR and look for late morning breakouts which actually tend to have more follow through then the early morning breakouts or breakdowns.

The problem with the failed A trades is noise. There just are too many of them and you will never find the best ones nor will you have any ability to filter for the nice ones. They will all be random. The breakout trades can be isolated. For example, you can get very very narrow by lowering the OR/ATR ratio to 15% or 12% to really fine tune the breakouts. You can't do this with fade trades. Simply looking for stocks with wide OR is meaningless because some will provide great fades and some will not. That's like saying the market might go up today or might go down. This will become very frustrating over time the sheer randomness of it.

Anyway, just a thought...
 
Does anybody have an indicator to plot A-levels on thinkorswim(specified to your parameters). I'm finding it cumbersome to put new a-levels on every symbol that I am watching or pull up!
 
Quote from Shanb:

Does anybody have an indicator to plot A-levels on thinkorswim(specified to your parameters). I'm finding it cumbersome to put new a-levels on every symbol that I am watching or pull up!
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Nobody? I'm getting excel overload LOLL
 
Bonds made a nice A up today, with the added kicker of being an "A up through the pivot." (15 min OR, 16/32 A value)

Natural Gas was tricky - made a confirmed A down (A down WAS the pivot), but quickly reversed. An aggressive trader probably could have turned the whipsaw loss into a breakeven day or small net gain by reversing as it blew back through the pivot. (15 min OR, 25 tick A value)

Mav is right about following a lot of markets - CL, ES, HG were less than ideal today. (Possible failed A down trade on CL, but you would have to hold uncomfortably close to consumer confidence number.)

(Just so I'm being completely above-board here - these aren't actual trades. I'm trying to get comfortable with the system, and "thinking out loud" here helps structure my thoughts and maybe adds a bit to the overall discussion.)
 
Quote from Shanb:

Nobody? I'm getting excel overload LOLL
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I don't use thinkorswim so I can't help you on this, but just out of curiosity: Do you calculate the levels in excel and then draw them manually in TOS? That would indeed be very cumbersome, I don't know which scripting language TOS uses but I guess it can't be much harder than e.g. Tradestations Easylanguage where it's pretty easy to build ACD based indicators
 
Quote from flip:

I don't use thinkorswim so I can't help you on this, but just out of curiosity: Do you calculate the levels in excel and then draw them manually in TOS? That would indeed be very cumbersome, I don't know which scripting language TOS uses but I guess it can't be much harder than e.g. Tradestations Easylanguage where it's pretty easy to build ACD based indicators
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Yep thats exactly what I do! Ya i've searched all over for the net for it, but no luck
 
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