The ACD Method

Maverick74 said:
The two best books on theory are "Option Volatility and Pricing" and "Option Market Making". After you read those two, all of the Augen books are great on the more subtle aspects of option trading. I cannot stress to you enough how important it is to learn and understand the theory cold. The reason being is that once you start trading them there are drastic differences between options on equities, indices, energy and currencies and bonds. You MUST understand this. Options are multidimensional in nature and each of those underlying products are multi-dimensional in nature so combined they are very complex.
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Thanks Mav. It looks like Option Volatility and Pricing (Natenberg) has a workbook coming out too in 2 months. I am in no rush to trade options so I will just focus on the theory until I have a good understanding and then focus on it from the trading point of view like you said.

Thanks again.
 
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Maverick74 said:
Man, this place really is dead. LOL. Didn't I put enough fish in the lake? :)

So going forward this is my new rule. I will re-visit this thread one day a week on Sundays. I'll respond to any questions or comments and maybe add a few of my own. This will keep me two involved but not so much where I need to pay for ET therapy. LOL.

Anyway....it's Sunday so I can post as much as I want. Nice to see you guys again. And yes, I'm long the Euro. :)
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Hello Mav,

Today I'm adding some of your recent outstanding posts to my Underground Mav EBook and spending some time in the number line Chapter. Doing so, a question came up:

Q: Do you use one intra-day OR for your basic A levels and another intra-day OR for your number lines?

Here’s why I ask. You have previously said you use the 30 minute for intraday confirmations. (6/5/15 : “There is some nuance here. For intra-day 30 min, weekly I use an hour, monthly a full day and QTR 2 days.”

However, regarding number lines, you have mentioned on a number of occasions using a 5 minute chart. Here’s a post from 2/1/14:by banco

Hi,

I've been trying to keep number lines on shares (based on examples of the scores in logical trader book) but with a lot of them nothing will happen (no A up, no A down) say about a 1/3 of the time. Are the shares I'm trading not volatile enough or is this normal?

"I use a 5 min OR and I get a lot of A ups and A downs. In fact, my equity number lines can get huge."

Just wondering :)
 
I use 5 min OR for intra-day. For the purpose of number lines you could use 10 seconds or 3 hours, it won't matter. Can you tell my why? Yes, it's a pop quiz.
 
Maverick74 said:
I use 5 min OR for intra-day. For the purpose of number lines you could use 10 seconds or 3 hours, it won't matter. Can you tell my why? Yes, it's a pop quiz.
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Hello Mav,

Just returned home from a summer outing.

Well as I've previously stated, I'm slow on the uptick. I guess I don't know.

I get very different NL's with different OR's. Take the SPY. On my 10 minute OR charts the 30 day confirmed on July 6th. On my 30 minute OR charts, it reset on 7/2 and is currently a measly -2. I interpret them very differently. How does that not matter?
 
Robert Yanks said:
Hello Mav,

Just returned home from a summer outing.

Well as I've previously stated, I'm slow on the uptick. I guess I don't know.

I get very different NL's with different OR's. Take the SPY. On my 10 minute OR charts the 30 day confirmed on July 6th. On my 30 minute OR charts, it reset on 7/2 and is currently a measly -2. I interpret them very differently. How does that not matter?
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The teacher is not going to answer this one. I'm going to wait for someone to correctly say it and I'll confirm it. This goes to the heart of the ACD methodology. If you don't understand this concept,it will be very hard to make money using this approach. Or really any approach in trading. I know someone on this thread knows the answer. So get them to say it Robert! :)
 

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Maverick74 said:
I use 5 min OR for intra-day. For the purpose of number lines you could use 10 seconds or 3 hours, it won't matter. Can you tell my why? Yes, it's a pop quiz.
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I think the answer is that it doesn't matter what size OR you use, just that you are consistent with that size. Over time you will hopefully begin to notice when your products start to reveal themselves. And also for making relative value comparisons between two products, only useful if both are consistent with the same OR.
 
Maverick74 said:
The teacher is not going to answer this one. I'm going to wait for someone to correctly say it and I'll confirm it. This goes to the heart of the ACD methodology. If you don't understand this concept,it will be very hard to make money using this approach. Or really any approach in trading. I know someone on this thread knows the answer. So get them to say it Robert! :)
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I will take a shot. The A levels used to compute NLs are not based on any OR. They are based on the daily pivot. Am I close or way off?
 
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