The ACD Method

IBB turned short term negative today. My monthly A Down is 287.41 and its low rested right in that area. I say down before up.

SPY went short term positive today. DIA did that back on 10/27.

USO turned short term positive. And …. it also confirmed a Monthly A Down! The most recent short term positive was on 7/29 but it turned back to neutral on 8/6. Hmmmm
 
justrading said:
Mav, some questions if I may.

If you're ever in the mood to write a long piece on ACD and Futures spreads, it would be most welcome.
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Hello JT,

My Marvelous Mav underground ACD ebook has 10 full 8 1/2 x 11 pages on spreads. Here's a dab from page 1

11-21-11


Going forward, I want to spend more time going over spread markets. Using ACD to locate and execute spread trades with solid edge. Nominal price alone has always been a terrible way to evaluate a given market. Everything must be evaluated relative to something else.

I'm going to give a simple example here: Being long the SPY against a short XLF, the financial ETF. While many are trying to top pick or bottom pick the market, the irony here is that both sides can put on this spread and express two completely different points of view while making the same money. There is two ways to look at this spread. One could say he is expressing his view that the market is going higher led by the large cap stocks. And she can be expressing her view that the market is going lower led by financials. Both have the same trade on, both sitting at or near the high of the year. This is how you find edge. Not by getting short SPY because you think the market is going to zero or getting long SPY because it's a new bull market.


11-21-11


For now the spreads will be dollar neutral. We want to be long volatility on the numerator on long spreads and vice versa. The idea here is to capture and isolate confirmed A trades that we expect to have follow through with less volatility then the outright. These spreads will be driven by price action. In other words, once the leading edge of the spread changes it behavior, to exit the spread. And correct, we most certainly are NOT trading mean reversion. We are looking for trends.

and from page 4:

12-23-11

That goes without saying (I hope). Trading is very difficult no matter what your style is and yes, it's going to take thousands of hours of hard work to master whatever style you are using. Although I do disagree that just because you spent 4k hours doing one thing, does not mean it will take 4k hours to learn another style.

Once you learn how to trade, you know to trade. Everything after that is tweaking and trial and error. There are no short cuts.

Spread trading in my opinion maximizes all the advantages that ACD provides. That doesn't mean learning it will be easy. It just means it will be worth it.

If one has any ambition of ever managing money one day, learning market neutral strategies is very important. If one has any desire to trade prop one day, market neutral strategies will be essential. If one simply wants to trade their own account while working a day job, I think ACD will give one a great framework to make solid directional macro calls.


02-05-12

Well....I like spreads. LOL. I think FSG is better than trying to short this market outright. I think if the ES keeps grinding up to 1350 to 1375, Gold should keep up thereby FSG will begin to form a base. If Gold breaks out and takes out the old highs, it will far outperform the ES. If we roll over, there is a good chance Gold will pullback as well, but I feel better now that Gold had a decent washout back to the QTR A down. There is a slight chance that all hell breaks out in Europe where ES tanks and Gold breaks out to the upside. In that scenario, FSG doubles in price back to $55 and beyond. So it seems like a cheap shot at a trade that could go parabolic if you are right and simply go sideways if you are wrong. I like those kinds of trades.

Every time I read Mav's insight I just think "Thank you thank you thank you".
 
Thanks Robert. I have those bits and pieces, what I'm hoping for is a magnum opus rather like the 3 pieces (2+1 answer actually) Mav did on Forex. There's so much value there I think it's about the best part of this thread.
 
justrading said:
Mav, some questions if I may.

1) Which futures spreads would you recommend for beginners? Some are apparently easy to lose your shirt on. I have dabbled with CL calendar spreads, slow moving at that time.
2) Are you familiar with any of these books? Some are old.

http://www.amazon.com/dp/9768108266...UTF8&colid=38AZD5895DUJT&coliid=IK86PBIHQYRRC

http://www.amazon.com/dp/0471716006...TF8&colid=38AZD5895DUJT&coliid=I18BTWXBXHSEFR

http://www.amazon.com/dp/0934380481...UTF8&colid=38AZD5895DUJT&coliid=IM14EK7UFBE6P

If you're ever in the mood to write a long piece on ACD and Futures spreads, it would be most welcome.
More...

Mav, if you are saving the comments on futures spreads for what you write later, could you give me an opinion on the books, assuming you are familiar with them.
 
And Robert, who do I have to kill to get that e-book off this thread? LOL. I've got some Chinese billionaires making me an offer and you posting it on here for free! :)
 
All three Small Cap ETF Indexes, IJR, IJS and IJT showing short term number line weakness while the Large Caps are showing strength.

Large Cap Value IVE had a short term positive today.

VXX had a short term negative today with a low of 27.73 and my Monthly A Down is at 27.77

XIV had a short term positive with a high of 38.12 and my Monthly A Up is at 37.90
 
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