The ACD Method
- Thread starter sbrowne126
- Start date
Trends are much smoother on the upside then the downside. When stocks get too cheap you run into valuation issues where mutual funds and value managers will scoop them up.
There is also the asymmetrical aspect of log normal distributions. The downside can only go to zero but the upside is unlimited. Makes following trends much more rewarding. Stocks also tend to gap less on the upside and stop placement is much easier. I could go on and on and on. Focus on the 52 week highs. Trust me on this.
From Shanb
Here's an interesting video I came across. Legendary trader Charles DiFrancesca talking about Spread Trading!
http://www.youtube.com/watch?v=QT0c...&feature=relmfu
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I watched the 9 parts series and enjoyed it. Thanks again.
Could I get some clarification on this point.
He said the spreaders made money and those that dont spread didnt make money.
He went on to give an example of seeing the "yen break" and buying bonds off the observation of the yen breaking.
My question is must there be a pair trade initiated to be spreading,
or , is spreading also putting on position in asset "A" due to the action in asset "B"
without necessarily taking a position in asset "B" ? Does this make one a spreader ?
Here's an interesting video I came across. Legendary trader Charles DiFrancesca talking about Spread Trading!
http://www.youtube.com/watch?v=QT0c...&feature=relmfu
_______________
I watched the 9 parts series and enjoyed it. Thanks again.
Could I get some clarification on this point.
He said the spreaders made money and those that dont spread didnt make money.
He went on to give an example of seeing the "yen break" and buying bonds off the observation of the yen breaking.
My question is must there be a pair trade initiated to be spreading,
or , is spreading also putting on position in asset "A" due to the action in asset "B"
without necessarily taking a position in asset "B" ? Does this make one a spreader ?
Charlie was a spreader. All bond traders are. Most of them are spreading different months against each other. Or they may be spreading notes over bonds (NOB) or Treasuries over Euro Dollars (TED) or 2's and 5's over 10's.
What they also use to do is watch other correlated products to try to get the edge over other locals in the pit. The 30 year bond pit where Charlie traded was huge. It was very hard to get orders from brokers. So guys would try to get a head start on other locals by watching the yen or gold or even crude. They know what the correlations are. If the yen goes offered bonds are going to catch a bid. So a quick local might lift an offer and offer up a tick or two when the pit goes bid following the down tick in yen.
Whether you are an actual spreader or a directional trader, you know to watch spreads and know what the relationships of all the products are. Everyone here does that intuitively, you probably just don't think of it that way.
Week is coming to a close. As expected, tech made its way down the 5 day number-lines and we are seeing alot of increased momentum to the downside there. SMH big volume down day today...SNDK missed on earnings and SMH will prob be gapping down tomorow. Real estate remains the only real pocket of strength in this market.
Price action in the indices has been whippy but with a definate bearish tone. We have confirmed monthly a downs in all the major indices. So far earnings haven't been bad, but the price action has. Went through some of the major names to report and we are seeing alot of selling on good or decent earnings.
It's funny, because despite all this, (and others may have different levels) I don't have hardly any confirmed quarterly A downs. Most everything has managed to bounce, and the few things that I thought might confirm coming into the week, (specifically health care) have managed to bounce or base somewhat.
Shan's right, almost everything has sold off after earnings, but so far, (and I say so far because tomorrow could be that day) most things have managed to remain above the quarterly levels. Look at AAPL, (not sure what others have for the quarter A down, but I have 581.98). Tested that level just Tuesday of this week after confirming that small four day H&S pattern, (coincidentally also a failed weekly A up last week). It bounced pretty hard off that quarterly level this week, (helps that the weekly A down and monthly A down were there too, as well as that last gap). Another example would be the XLK, (my quarterly at 29.18). As weak as it's been, it continues to bounce in that zone.
Just something interesting to note. I know lots of commentary has surrounded whether or not 2012 is just going to be another repeat of lousy mid-year action, or a limp into the third quarter. While the action in Q2 has been choppy, the lack of confirmed quarterly A downs are at least of note.