The ACD Method

[justrading]

Way back Mav said shale oil would be a game changer and it's interesting to watch the dynamic. Rigs were closing steadily when the price was low. OPEC cut and the price went back up, now rigs are re-opening at a steady rate. I wonder how much upside there can be in oil under these circumstances.

https://www.bloomberg.com/news/arti...exports-climb-to-record-as-crude-output-grows

https://www.bloomberg.com/news/arti...re-oil-in-2017-than-four-opec-nations-produce

 

[tonysoprano]

My 30 NL in WTI was negatively confirmed but has now reset and is neutral. It looks like it's going to be range bound for awhile. Gasoline is on fire however. The front end of the curve has been unstoppable.

Hi Mav,
Have read many of your posts especially related to spreads and your mention of energy as one of your preferred trading instruments as opposed to other futures sectors.
So, when considering whether to put on a NG or CL spread (or other energy spread - let's consider just those for the moment), and you have a bazillion calendar, butterfly, condors as possible trades how do you go about narrowing the bazillion down to a select few as trade candidates?
Am not asking for secret sauce but rather your thought process.

Thanks

 

[SteveM]

Tonysoprano, are we supposed to still supposed to push Webistics?

 

[Maverick74]

Hi Mav,
Have read many of your posts especially related to spreads and your mention of energy as one of your preferred trading instruments as opposed to other futures sectors.
So, when considering whether to put on a NG or CL spread (or other energy spread - let's consider just those for the moment), and you have a bazillion calendar, butterfly, condors as possible trades how do you go about narrowing the bazillion down to a select few as trade candidates?
Am not asking for secret sauce but rather your thought process.

Thanks

Good question. First, you should never trade anything you don't understand. These guys that say all they need are the charts are full of shit. Understand what you are trading. This really applies to energy. So this right there eliminates 90% of the bazillion choices you have. Next, try to look for things, especially in the beginning that have some correlation to flat price. This will help you get your sea legs. You will be able to spot relative strength or weakness relative to the flat price. Third, try to match the spread with your personality. If you are a risk averse person, look for that in your spread combos. There are plenty of old granny spreads out there that move around like an 85 year old with arthritis. There are others that behave like a meth-head having a particularly bad day. Make sure you get in the right category so you can have the patience needed to extract the most economic benefit.

Spreads have deltas just like options. Delta is simply a rate of change of the spread in question to the prompt month price (front month). So if the spread has a delta of .10 then that means let's say in WTI, for every dollar move up, your spread will move .10.

Good luck!

 

[justrading]

Good question. First, you should never trade anything you don't understand. These guys that say all they need are the charts are full of shit. Understand what you are trading. This really applies to energy. So this right there eliminates 90% of the bazillion choices you have. Next, try to look for things, especially in the beginning that have some correlation to flat price. This will help you get your sea legs. You will be able to spot relative strength or weakness relative to the flat price. Third, try to match the spread with your personality. If you are a risk averse person, look for that in your spread combos. There are plenty of old granny spreads out there that move around like an 85 year old with arthritis. There are others that behave like a meth-head having a particularly bad day. Make sure you get in the right category so you can have the patience needed to extract the most economic benefit.

Spreads have deltas just like options. Delta is simply a rate of change of the spread in question to the prompt month price (front month). So if the spread has a delta of .10 then that means let's say in WTI, for every dollar move up, your spread will move .10.

Good luck!

Absolutely agree that there is more than just the charts. I was so sure that since everyone knew about the Brexit announcement, there would be no drastic moves, so I just traded on the numbers. Big mistake, and who cares if it was manipulation or whatever, long story short I got stopped out on one Euro cross and closed another for a loss before it hit my stop. Bit upset with myself for being sloppy.

 

[baggerlord]

Speaking of trading things you don't understand, I have realized recently that I have traded my whole adult life without tracking the USD. I never understood that the dollar is half of my trade.

 

[tonysoprano]

Tonysoprano, are we supposed to still supposed to push Webistics?

What a classic scene. I think you should always push the pick of the week.

 

[copyplus]

I understand utilizing ACD to form a directional bias and not using it as a red light/green light trading system, but there has been some sentiment expressed in this thread and by MF advising against using other common methods of TA under the guise of "avoid what everyone else is doing". It's not clear to me why, if it works.

I think some of this sentiment may go back to Mav's days at Worldco. He talks about it once in a while. If I recall, the story goes that he made a nice living trading stocks that no one ever heard of while the guys who came in trading the high-flyers and household names all washed out.

My understanding is that it isn't so much that because everyone sees it therefore it can't work; but more that if everyone sees it then you're going to have more traffic/noise to deal with.

 

[baggerlord]

Something I have come to understand is that it helps to look at it from the point of view of people that manage OPM. IE They need to be in equities when equities are going up or they will underperform and lose business. So that trade gets crowded like this years bull run. The number lines can help to spot when that bull run is winding down and we can be there early when all the big money finally has to bail. Turns out that thread on calling the SP top was actually pretty close to what the number lines were saying. Maybe he used ACD to make the call.

 

[sparkyunited]

I think some of this sentiment may go back to Mav's days at Worldco. He talks about it once in a while. If I recall, the story goes that he made a nice living trading stocks that no one ever heard of while the guys who came in trading the high-flyers and household names all washed out.

Makes total sense. My regular line of work requires me to think outside the box and be a critical thinker a lot of the time, and I find that most others aren't. I think I forget a lot of traders are sheeple just like folks in the non-trading universe.

Adopting various aspects of ACD has been very intuitive to me. It's also why I've enjoyed reading a lot of the discussion on this thread.