The ACD Method

[Maverick74]

ok, here is one:

what is based on your observation and experience is the toughest hurdle swing trader has to overcome for lasting success ?

That's actually a great question. From what I have observed across the board, and I think ET demonstrates this as well, is the fact that you need far more discipline swing trading. With daytrading, discipline is kind of forced on you both through the use of leverage and through time. But with swing trading, it's very easy for a trader to sit on losers, avg down, get emotionally involved in their position and also at the same time to really take advantage of the one thing swing trading offers, which is time. Holding on to your winners.

I think swing traders are far more opinionated about their positions. You often hear them talk about what the market "should do" or the "fed", or "manipulation", etc. They lose sight of the quantitative aspect of this job. You have probably often heard me say on other threads why I feel math is important and the understanding of statistics and numbers in general. Usually this is in response to how to get a "trading job" in which many guys blurt back, I don't need that crap, I know how to trade. But the problem is, when you are missing the quantitative side of things, it often gets replaced by emotion and conspiracy and crazy ideas of why the market should be doing something other then what it actually IS doing.

To give an analogy, it's like you are going in for surgery and the doctor, instead of using his medical expertise and relying on hard data, imagine if he instead made judgements about you based on your diet, life style or maybe the fact he just doesn't like you. It's very important for a doctor to separate emotion from data. Doctors have to be make logical decisions based on research, probability and past experience.

Another important aspect of swing trading that I think is important is the concept of optimizing time. Since time is such a critical variable in your p&l, one has to be far more efficient in how they allocate it. In other words, if one is daytrading and they trade the wrong stock that day or focus on oil when they should have been watching gas, the consequence is relatively minor, it's just one day. But if you allocate capital to say a position in the ES that you ended up holding for two weeks and the trade didn't go anywhere but copper made a 30% move, well, that ES trade actually cost you a lot of money. The idea of opportunity cost is often neglected on ET. Opportunity cost is huge. Time is such an important variable and it must be optimized. The penalty for time is multitudes larger for swing traders than day traders.

Good question too lazy.

 

[ignl]

That's actually a great question. From what I have observed across the board, and I think ET demonstrates this as well, is the fact that you need far more discipline swing trading. With daytrading, discipline is kind of forced on you both through the use of leverage and through time. But with swing trading, it's very easy for a trader to sit on losers, avg down, get emotionally involved in their position and also at the same time to really take advantage of the one thing swing trading offers, which is time. Holding on to your winners.

I think swing traders are far more opinionated about their positions. You often hear them talk about what the market "should do" or the "fed", or "manipulation", etc. They lose sight of the quantitative aspect of this job. You have probably often heard me say on other threads why I feel math is important and the understanding of statistics and numbers in general. Usually this is in response to how to get a "trading job" in which many guys blurt back, I don't need that crap, I know how to trade. But the problem is, when you are missing the quantitative side of things, it often gets replaced by emotion and conspiracy and crazy ideas of why the market should be doing something other then what it actually IS doing.

To give an analogy, it's like you are going in for surgery and the doctor, instead of using his medical expertise and relying on hard data, imagine if he instead made judgements about you based on your diet, life style or maybe the fact he just doesn't like you. It's very important for a doctor to separate emotion from data. Doctors have to be make logical decisions based on research, probability and past experience.

Another important aspect of swing trading that I think is important is the concept of optimizing time. Since time is such a critical variable in your p&l, one has to be far more efficient in how they allocate it. In other words, if one is daytrading and they trade the wrong stock that day or focus on oil when they should have been watching gas, the consequence is relatively minor, it's just one day. But if you allocate capital to say a position in the ES that you ended up holding for two weeks and the trade didn't go anywhere but copper made a 30% move, well, that ES trade actually cost you a lot of money. The idea of opportunity cost is often neglected on ET. Opportunity cost is huge. Time is such an important variable and it must be optimized. The penalty for time is multitudes larger for swing traders than day traders.

Good question too lazy.

Not to miss copper you need to watch it. What techniques you use to maximize number of markets you watch and not getting overwhelmed by too much. How do you know that more markets in your watch list would do more harm than good?

 

[toolazy]

That's actually a great question. From what I have observed across the board, and I think ET demonstrates this as well, is the fact that you need far more discipline swing trading. With daytrading, discipline is kind of forced on you both through the use of leverage and through time. But with swing trading, it's very easy for a trader to sit on losers, avg down, get emotionally involved in their position and also at the same time to really take advantage of the one thing swing trading offers, which is time. Holding on to your winners.

I think swing traders are far more opinionated about their positions. You often hear them talk about what the market "should do" or the "fed", or "manipulation", etc. They lose sight of the quantitative aspect of this job. You have probably often heard me say on other threads why I feel math is important and the understanding of statistics and numbers in general. Usually this is in response to how to get a "trading job" in which many guys blurt back, I don't need that crap, I know how to trade. But the problem is, when you are missing the quantitative side of things, it often gets replaced by emotion and conspiracy and crazy ideas of why the market should be doing something other then what it actually IS doing.

To give an analogy, it's like you are going in for surgery and the doctor, instead of using his medical expertise and relying on hard data, imagine if he instead made judgements about you based on your diet, life style or maybe the fact he just doesn't like you. It's very important for a doctor to separate emotion from data. Doctors have to be make logical decisions based on research, probability and past experience.

Another important aspect of swing trading that I think is important is the concept of optimizing time. Since time is such a critical variable in your p&l, one has to be far more efficient in how they allocate it. In other words, if one is daytrading and they trade the wrong stock that day or focus on oil when they should have been watching gas, the consequence is relatively minor, it's just one day. But if you allocate capital to say a position in the ES that you ended up holding for two weeks and the trade didn't go anywhere but copper made a 30% move, well, that ES trade actually cost you a lot of money. The idea of opportunity cost is often neglected on ET. Opportunity cost is huge. Time is such an important variable and it must be optimized. The penalty for time is multitudes larger for swing traders than day traders.

Good question too lazy.

thank you ! I like and practice what you once said: find your own space in the market. so I did and that resolves several issues you mentioned above.

however, any hints how do you optimize time ? I know one, which is use time stops based on statistics from 'my space'.

I found that can hold really 1 trade at the time. Having 2 or more degrades trade management and never produced good results. My trading does not rely on TA only (also sentiment & fundamentals) and cant process them as well if under pressure of many positions.

 

[Maverick74]

Not to miss copper you need to watch it. What techniques you use to maximize number of markets you watch and not getting overwhelmed by too much. How do you know that more markets in your watch list would do more harm than good?

The short answer is the number lines. The number lines should filter everything down for you. The irony is you don't end up watching all that much stuff. At any given time only a few products are in confirmation. Yes, you have to spend the time to score them every night but that is not the same as watching them. More about manual labor.

 

[Maverick74]

thank you ! I like and practice what you once said: find your own space in the market. so I did and that resolves several issues you mentioned above.

however, any hints how do you optimize time ? I know one, which is use time stops based on statistics from 'my space'.

I found that can hold really 1 trade at the time. Having 2 or more degrades trade management and never produced good results. My trading does not rely on TA only (also sentiment & fundamentals) and cant process them as well if under pressure of many positions.

See above post.

 

[ignl]

The short answer is the number lines. The number lines should filter everything down for you. The irony is you don't end up watching all that much stuff. At any given time only a few products are in confirmation. Yes, you have to spend the time to score them every night but that is not the same as watching them. More about manual labor.

Thanks! That's what I thought and trying to do. Watching closely only "interesting" stuff at the time and have some kind of filter/signals to recognize it (my filter is price near certain pivot level, just like livermore's and NLs as a helper. I have coded NLs and didn't review much products yet but from few I checked automatic NLs (just like Fisher's) is working quite well too (and automation saves a lot of time The purpose of number line IMO is to quantify intraday price action (strong/weak/neutral) and yes if for example product closes and confirms above lets say some longer term resistance that's a big deal for intraday price action and automated OR focused NLs might not reflect that. Which leads to my another idea I'm working on. Have anyone thought about using ACD for levels like s/r, high/low, rolling pivots etc? As soon as price touches significant level - start counting OR and use standard ACD on it.

 

[Maverick74]

Thanks! That's what I thought and trying to do. Watching closely only "interesting" stuff at the time and have some kind of filter/signals to recognize it (my filter is price near certain pivot level, just like livermore's and NLs as a helper. I have coded NLs and didn't review much products yet but from few I checked automatic NLs (just like Fisher's) is working quite well too (and automation saves a lot of time The purpose of number line IMO is to quantify intraday price action (strong/weak/neutral) and yes if for example product closes and confirms above lets say some longer term resistance that's a big deal for intraday price action and automated OR focused NLs might not reflect that. Which leads to my another idea I'm working on. Have anyone thought about using ACD for levels like s/r, high/low, rolling pivots etc? As soon as price touches significant level - start counting OR and use standard ACD on it.

I do all sorts of creative things with number lines. Creativity is your friend. Let me just say that you are moving in the right direction with your thought process. Let me repeat some of the important principles. The concept of "rarity". The less something happens, the more significant it is. Look for time periods that are "meaningful". Especially pay attention to trades that go against what the fundamentals would otherwise imply. Look for correlation breakdowns. And get very excited when you spot something that NOBODY else is talking about either in the media, twitter or ET. Those are some good hints to set your sails by.

 

[eurusdzn]

Look for Rarity, significant timeframe, PA defying fundamentals, correlation breakdowns...
Thats another gem in an outstanding thread. Thanks.

 

[Robert Yanks]

I’ve attached my year to date Monthly A up and downs from the Russell 3000 (I also keep quarterly and yearly). I’m keeping them for now as it’s easy and somewhat interesting for this newb.

You can see that January had a total of 2097 up and downs; February had 1417 and March (with one day left) has 1359. The Rolling 5 day went negative on 3/25/14 for the first time since 2/7/14.

February was interesting because the first day was so negative on most charts yet you can see that the fixed monthly total ended up at 975. It started weak but certainly took off. You can also see that March’s monthly total is very weak with one day left.

On the far right you can see a net up day gets a 1 and a net down day gets a -1; then I sum for 10 days. It turned negative on Thursday for the first time since 2/12/14. I’ve run the data for 2013 but haven’t had the time to sum the results and place it in a SS.

 

[smallStops]

Out of curiosity, do you know where is described how to find the A and C(?) values?