The ACD Method

Quote from Maverick74:

Here is the Mark Fisher video. Am I the only one that watched it? LOL.

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thanks I missed that, interesting how he keeps bringing up the idea of an "energy currency", any chance his group is positioned to take advantage of that, yep. Trying to understand how that would work, I think the idea would be to have a global oil price that doesn't have the volatility swings of domestic currencies which is a major headache for large oil companies, thoughts?


http://seekingalpha.com/article/129500-banking-on-energy-rather-than-currency-or-gold
 
Quote from Robert Yanks:

I’m flipping thru EOD charts looking at the Sushi Roll and doing a little backtesting and I’d like your opinions on something.

I set up my scan and here’s what I noticed. In all cases today’s close is higher than the high of the previous 5 day rolling trading days, and in most cases today’s close is also higher than the current 5 day rolling trading days. But, sometimes today’s close is not the highest close of the current 5 day rolling trading days.

As an example, if you look at GE on 1/10/11 you can see that the close of 18.51 is higher than the 5 day rolling high from 12/28/10 to 1/3/11 (18.50) but in fact it’s not the highest close of the current 5 day rolling trading days from 1/4/11 to 1/10/11. Do you consider this a successful Sushi Roll? Or, do you want today’s close to also be the highest close of the current 5 day rolling trading days too?
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Honestly I never traded the sushi roll. It's very similar to an outside reversal day or week except you can use it on any time frame. The problem I have with outside reversal type patters is they are way too visible. Everybody seems them and they don't really work anymore. Is it something I would pay attention to if I saw one? Sure. But I'm not actually going to make a trade on that.

The one caveat I'll throw in there is the idea of rarity. Like Fisher says, the less frequent something happens, the better the signal. I see outside reversals all the time. They are not rare at all. But if you see a stock that has been smooth and trending for months or quarters and then you spot a sushi roll for the first time in perhaps 2 or 3 years, then I would certainly watch that like a hawk.

But in the broad based indices I see reversal patterns everywhere and they don't work. Why? Because the indices are analyzed 7 ways from Sunday.
 
Thanks for posting. I was away otherwise I always want to hear what Mark has to say. If for nothing more than mere reflection.
 
Quote from Maverick74:

Honestly I never traded the sushi roll. It's very similar to an outside reversal day or week except you can use it on any time frame. The problem I have with outside reversal type patters is they are way too visible. Everybody seems them and they don't really work anymore. Is it something I would pay attention to if I saw one? Sure. But I'm not actually going to make a trade on that.

The one caveat I'll throw in there is the idea of rarity. Like Fisher says, the less frequent something happens, the better the signal. I see outside reversals all the time. They are not rare at all. But if you see a stock that has been smooth and trending for months or quarters and then you spot a sushi roll for the first time in perhaps 2 or 3 years, then I would certainly watch that like a hawk.

But in the broad based indices I see reversal patterns everywhere and they don't work. Why? Because the indices are analyzed 7 ways from Sunday.
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Thank you Mav (if I may call you that). As always, excellent insight. I’m just looking at all the material and methods he brought forward in the book and videos so I can see it and test it and then hopefully come up with something that everyone else doesn’t see. As you pointed out, even at 5 days this pattern stands right out. Now I can scratch off the outside 5 day rolling trade.

If anyone is interested, I ran a simple backtest that found every 5 day rolling outside day and then bought the next day with various entries and one of the better ones was if today’s high is greater than the high of the previous 5 days plus .25 of the 10 day ATR. I’m using a group of 1500 stocks that consists of the sp500, mid cap 400 and small cap 600. Close after 3 days before getting fancy with exits to see if there is any edge. Bottom line as Mav pointed out is no edge there. I also ran a backtest so today’s close is higher than the previous 5 day rolling high but not the highest close of the current 5 days (looking to see if it’s hidden will it work better). Same basic results. I attached the 2010 ss for anyone that wants a peek. The first run was 3,614 setups and the second run (attached) was only 438 setups. About a 53% win rate taking every setup. For the years 09 08 07 it does worse, or worster.
 

Attachments

Quote from Robert Yanks:

Thank you Mav (if I may call you that). As always, excellent insight. I’m just looking at all the material and methods he brought forward in the book and videos so I can see it and test it and then hopefully come up with something that everyone else doesn’t see. As you pointed out, even at 5 days this pattern stands right out. Now I can scratch off the outside 5 day rolling trade.

If anyone is interested, I ran a simple backtest that found every 5 day rolling outside day and then bought the next day with various entries and one of the better ones was if today’s high is greater than the high of the previous 5 days plus .25 of the 10 day ATR. I’m using a group of 1500 stocks that consists of the sp500, mid cap 400 and small cap 600. Close after 3 days before getting fancy with exits to see if there is any edge. Bottom line as Mav pointed out is no edge there. I also ran a backtest so today’s close is higher than the previous 5 day rolling high but not the highest close of the current 5 days (looking to see if it’s hidden will it work better). Same basic results. I attached the 2010 ss for anyone that wants a peek. The first run was 3,614 setups and the second run (attached) was only 438 setups. About a 53% win rate taking every setup. For the years 09 08 07 it does worse, or worster.
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Robert, I would really prefer if you call me by birth name, Maverick74. Kidding.

I never did the back test so it was interesting to see your results. I pretty much expected that to be the case. Here is what I like about ACD. The idea in trading, like anything in life, is to look for the opportunity that others are not seeing. Head and shoulders, reversals, doji's, 200 day moving averages, moving average crosses, support and resistance, etc, everybody sees that shit. It's plain as day. Hell if you miss any of that stuff, CNBC will point it out to you to remind you. There is no edge in anything that everybody can see right in front of them.

So the idea is to become a good price action trader and ACD allows you to see price action better then any other method I have seen. This is why it's hard to back test ACD as many have tried because they are back testing simple binary action. The idea is to identify price action that is NOT obvious to everyone else. ACD is one of those things you just have to practice like tennis. The more products you watch, the better your feel will become.

Because ACD is a price action based methodology, others can't take your edge away from you. You know the old saying, if everyone does it, then it won't work anymore. That doesn't apply here. If you can learn to master ACD, you can keep your edge into perpetuity.
 
Quote from Maverick74:

Robert, I would really prefer if you call me by birth name, Maverick74. Kidding.

I never did the back test so it was interesting to see your results. I pretty much expected that to be the case. Here is what I like about ACD. The idea in trading, like anything in life, is to look for the opportunity that others are not seeing. Head and shoulders, reversals, doji's, 200 day moving averages, moving average crosses, support and resistance, etc, everybody sees that shit. It's plain as day. Hell if you miss any of that stuff, CNBC will point it out to you to remind you. There is no edge in anything that everybody can see right in front of them.

So the idea is to become a good price action trader and ACD allows you to see price action better then any other method I have seen. This is why it's hard to back test ACD as many have tried because they are back testing simple binary action. The idea is to identify price action that is NOT obvious to everyone else. ACD is one of those things you just have to practice like tennis. The more products you watch, the better your feel will become.

Because ACD is a price action based methodology, others can't take your edge away from you. You know the old saying, if everyone does it, then it won't work anymore. That doesn't apply here. If you can learn to master ACD, you can keep your edge into perpetuity.
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That is some fantastic input Mav. Oops, I mean Maverick74!

I have spent the last six months trading B/O’s that everyone in the world can clearly code up and see. No edge there as I’ve barely broke even with that method.

I've moved on to the 1 day pivot ranges and 3 day rolling pivot ranges on my charts and I’m flipping thru lots of them looking at the price action, and attempting to see the not so obvious. For now I’m just using the pivot ranges as my de-facto OR.

Thanks again for your input.
 
Hey everyone,

I'm new to this thread, but have read over it and am very happy to find a place where other traders are discussing ACD. I personally trade ACD, and have had a good deal of success with it so far.

Like Maverick, and other posters have pointed out, ACD is not the Holy Grail of trading, it is however a structural framework that allows a trader to see the big picture and remove much of the guesswork from their trading.

I'd like to throw out some questions, and also throw out some tidbits as to how I have developed a framework to trade using ACD.

Random thoughts observations with ACD trading futures only (this is solely my opinion and should not be taken as advice, just thoughts for you to work with):


1) If trading crude oil, one should not use ACD on the open before the major EIA supply report gets released at 10:30am. Doing so would be gambling, not trading. Yes, on certain days using ACD on these days would lead to catching major trends, but in general you will find yourself getting stopped more often than not.

2) In the sugar market, instead of using the other side of the opening range as a stop loss, use 40% of the range as your stop loss. In 90%+ of cases, it seems if price retraces back in to the opening range this much, they will tend to keep retracing.

3) When taking the opening range, pay attention to previous day high/lows, weekly high lows etc. These can serve as good take profit targets or signals of continuation should price break through these levels.

4) While Mr. Fisher may disagree with this a little bit, it does pay to use common sense and not just take a trade solely because an A up or A down was made. For example, in oil fell $4 overnight, but the general market sentiment is bullish, there is a chance that taking an A down right away may not be advantageous, as the market might be a little extended already.

On a similar note, lets say on any market, the first 15 min bar after a breakout shoots extremely far out of the opening range; if you are a "hold to close" type of trader, you may want to instead take profits at that moment knowing that such a move beyond this level is less likely. How to know this? Familiarity with the market you are trading/tape reading, knowledge of probabilities relative to standard deviations etc; the type skills as pointed out by maverick.

5) I have found that early day C downs/up are more powerful than even late day C downs/ups.

6) after a major A up/down parabolic trend day, the following day is less likely to have another trend day.

7) Some markets really do work better than others, know which ones to avoid. Also, find out what information actually moves the particular market you are trading.

8) I have found that the time factor regarding entering ACD trades is not as significant as previously proposed.

9) Excellent a up/down trend days rarely have price hanging inside the opening range for very long after the opening range is established.

10) The key to profitably trading ACD is to play great defense on most days, and to be on the right side of major rally/selloff trades (and they will come).

Now some questions if I may:

1) what markets do you successfully use ACD on? Do you have any personal filters you use? How do you exit your trades?

2) When calculating the pivot range, for the H+L+C/3, what time frames do you use?

For crude, would it be best to use 9:30am bar for the open and 9:15am bar following day for the close for the one day range calculations?

I ask because my platform uses 12:00am bar for the open and 11:59pm for the close, and I don't know if this time frame properly reflects when the most important trading of the prior day too place.

Would love to hear your opinions on this stuff. Thanks.
 
I have found when using it, use it in conjunction with Crabel NR7 and such. So if today following an NR7 daily, watch the PDH and PDL as well as the opening range.

Don't trade ACD after a wide range day. Because normally there is consolidation and this is bad for ACD.

As some have mentioned, you can use ACD to basically bracket and relevant action. That includes price action around the major reports or events. Unemployment, housing, oil reports, you get the point. I would not use it around less relevant reports. Right now evening open with the Yen would be relevant IMO as everyone is hanging on edge for Japanese news.

I have only used the pivot range off the previous day's range as Mark suggested.

Thanks for your tips.
 
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