The ACD Method

Quote from smcmahon83:

Mav,

Thanks for the infor. When you say "longer time frame ACD values" do you mean that you use something similar to the rolling 3 day pivot as described by Fisher, or take opening range of first day of trading and use that as your breakout/stop placement for the rest of the week? A little bit of both?
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I can't believe there are like 4 people on ET that use ACD. Maybe that is why it's so effective. Everyone else is too busy trying to pick a top in silver and the S&P instead of actually learning how to trade.

Anyway, back to your question. No, I don't use the rolling pivots, or really any of the "macro" stuff in Fisher's book. I created my own version of what I call the Macro ACD. And yes, same principles, except on weekly, monthly, quarterly and yearly time frames. I find they work much better then just using longer term pivots.

I honestly cannot stress enough what a great book "The Logical Trader" is for any of you that have not read it. Just as a trading book, as a way of treating the markets as a business and not a gamble. I think a lot of guys on here lose sight of the fact that this is a real business just like running a restaurant. Too many guys focusing on picking tops and bottoms and taking shots at the market. Trading is all about understanding probability and odds and payoffs. It's about focusing your time efficiently. Read the book again, only this time put a focus not so much on how does he determine the "A" values but rather how he looks at trading as running a casino.

I've read the book several times with each time focusing on a different aspect of this business while I read it. Too many guys get caught up in formulas and variables and values of this and that when at the end of the day it's about the nuance and subtly of price action that is so important.
 
Quote from Maverick74:

I can't believe there are like 4 people on ET that use ACD. Maybe that is why it's so effective. Everyone else is too busy trying to pick a top in silver and the S&P instead of actually learning how to trade.
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Let me ask you if you think this stat (which I'm grabbing from an Amazon review of the Logical Trader book) is accurate:

"Traders taught by Fisher have had a 40 - 50% success rate compared to around 10 - 15% for the average trader using different techniques"

The reason I ask is that I'm pretty interested in the relative success rates of trading methodologies and trying to unpack the "95% of traders fail" statistic into something more meaningful to discern if there are any statistically significant differences in failure rates by trading methodology. This is why I started this thread last week:

http://www.elitetrader.com/vb/showthread.php?s=&threadid=219746

I've got my approach and I'm very happy with it, so this is more of a curiosity than me trying to figure out which approach to use, although I suppose diversifying approaches might not hurt if they were non-correlated.
 
Quote from logic_man:

Let me ask you if you think this stat (which I'm grabbing from an Amazon review of the Logical Trader book) is accurate:

"Traders taught by Fisher have had a 40 - 50% success rate compared to around 10 - 15% for the average trader using different techniques"

The reason I ask is that I'm pretty interested in the relative success rates of trading methodologies and trying to unpack the "95% of traders fail" statistic into something more meaningful to discern if there are any statistically significant differences in failure rates by trading methodology. This is why I started this thread last week:

http://www.elitetrader.com/vb/showthread.php?s=&threadid=219746

I've got my approach and I'm very happy with it, so this is more of a curiosity than me trying to figure out which approach to use, although I suppose diversifying approaches might not hurt if they were non-correlated.
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I'm not sure that 50% stat is accurate or not. I do know that Mark over the years has been highly selective of who he lets into his firm so keep in mind the guys (and girls) that trade there already went through a very heavy screening process.

Having said that, let me say this. What bugs a lot of people when I tell them about ACD and then they say great, let me backtest this on say TradeStation, I tell them that's not going to work. They ask why not? I tell them it's a price action based system and it's highly discretionary. It's not back and white. This makes them angry and they move on to something else. LOL.

But I've got news for everyone, black and white trading does not work. There are no magic set of rules in this game. There is no magic formula. There is no getting around the fact that in order to make money in this business, someway somehow you are going to have to become a good trader.

Even in the book, "The Logical Trader" Mark does trader interviews in the later chapters and he points out how all these guys incorporate ACD differently. Most these guys somehow fit ACD into their own unique personality. Some traders only use certain aspects of it, others are more rigid.

I will say this, based on what I have heard, thousands of guys on the floor over the years have used this approach to trade. Considering these guys trade crude oil, nat gas, heating oil, silver and gold, and have been able to weather the volatility of those products, I think that says a lot about ACD.
 
As always, good insightful posts Mav.

The book was very enjoyable for me and it has provided a great deal of overall market knowledge that I would never have considered without it. I'm going to read it again. I kinda sorta set it aside for now because I have not figured out a way to calculate workable opening range values being a strictly end of day data swing/position trader. (And, a not so successful just below breakeven so far this year swing trader.)

Interesting to see your posts as just this morning I was thinking perhaps I’ll take a look at say a Monday’s action on a number of issues and then consider open/close or perhaps even the H/L as a quasi OR for the rest of the week. Thinking out loud here … then perhaps use the pivot ma’s to help pick best candidates to set next day orders etc.

Btw Mav, do you follow the White Socks? They just got a dose of feel better playing my woeful Mariners. Gawd it’s painful to be a fan of a multi-year miserable team!
 
Mav,

I agree completely with your last few posts. I found it interesting too, if you watch the video of Fisher's son that you posted, the CNBC crowd asks him what caused to 10% drop in Crude Oil the day before...

His response was in regards to the problems caused by front running and high-frequency trading and that "there was no fundamental reason for the selloff". I laughed when I read that, because it is the exact thing the Fisher says separates himself from the majority of other traders. "How high is high? Who knows" "the best trades are often the ones hardest to take" and things like that. Even Fish's own kid was breaking the mental framework of ACD methodology. (trade the tape, price moves before News etc).

I agree with what you're saying in terms of the nuances of ACD as well. Something I've been working with lately has to do with finding other periods during the trading day that have ranges that are significant other than opening ranges for certain commodities.

I also agree that ACD is just a framework for trading, and is not the holy grail nor should be interpreted as such.

The greatest thing that ACD trading has done for me is that it laid down a structural framework for me while intraday trading. Before ACD, if I was bullish on a commodity I would buy on the open in the morning. So whether price started going in against me or going for me I still had no framework to know where I was and where I should be looking to take profits or exit my trades. So needless to say I was consistently losing money because I was completely driven by my emotions with no "map" to guide me.

Fast forward to today and that has all changed. My ACD framework is in place....And like you were saying, profits in ACD do require additional abilities and discretion. To enhance these areas I use different tools like prior day high/lows, paying attention to economic releases coming out during the day. Something I've also been looking at lately is to see if the 30YR treasury makes an A up/or down to confirm taking index trades in the opposite direction.

Fisher has a trade called the "Super A" on energies....He looks for an "A" to be make in Brent Crude on the overnight, and then looks crude and RBOB(Summer mos) HO(cold months) to both make A's in the direction of the brent A. This is one of his "press your bets" trades according to him...

Basically for me, it is continuing to add those layers of confirmation that lead to trading with confidence which in turn leads to trading much more profitably. My biggest problem is that I make my money early in the day from ACD and then take additional stupid trades later in the day. Like Mav said, with the Casino mentality if we know we have a 70% chance of winning a hand, and we have won that hand, every hand we play thereafter during the same day has a MUCH less chance of success. Hopefully I will learn this fully in the near future.

If you consistently research ACD setups across multiple markets and would like to exchange ideas, PM me.
 
Quote from Robert Yanks:

As always, good insightful posts Mav.

The book was very enjoyable for me and it has provided a great deal of overall market knowledge that I would never have considered without it. I'm going to read it again. I kinda sorta set it aside for now because I have not figured out a way to calculate workable opening range values being a strictly end of day data swing/position trader. (And, a not so successful just below breakeven so far this year swing trader.)

Interesting to see your posts as just this morning I was thinking perhaps I’ll take a look at say a Monday’s action on a number of issues and then consider open/close or perhaps even the H/L as a quasi OR for the rest of the week. Thinking out loud here … then perhaps use the pivot ma’s to help pick best candidates to set next day orders etc.

Btw Mav, do you follow the White Socks? They just got a dose of feel better playing my woeful Mariners. Gawd it’s painful to be a fan of a multi-year miserable team!
More...

Yes, I follow the White Sox. I don't know what's going on there this year. I honestly thought they were the team to beat in the American League this year. Of course I have noticed a pattern over the years. When we have a cold spring here, they always get off to a slow start as the ball is very heavy. Once the heat and humidity set in, the ball starts flying out of the park. We'll see.
 
Quote from smcmahon83:




Fisher has a trade called the "Super A" on energies....He looks for an "A" to be make in Brent Crude on the overnight, and then looks crude and RBOB(Summer mos) HO(cold months) to both make A's in the direction of the brent A. This is one of his "press your bets" trades according to him...

Basically for me, it is continuing to add those layers of confirmation that lead to trading with confidence which in turn leads to trading much more profitably. My biggest problem is that I make my money early in the day from ACD and then take additional stupid trades later in the day. Like Mav said, with the Casino mentality if we know we have a 70% chance of winning a hand, and we have won that hand, every hand we play thereafter during the same day has a MUCH less chance of success. Hopefully I will learn this fully in the near future.

If you consistently research ACD setups across multiple markets and would like to exchange ideas, PM me.
More...

On the Super A trade, I heard him talk about that as well but I don't like that trade. I noticed our markets do their own thing once we open over here. I haven't looked enough at the overnight Brent Crude but I do watch the European indices and the currencies and I notice we get many different types of trading days then what the overnight session showed.

One of the major attributes of ACD whether you use it intra-day or for swing trading is it really keep you from over trading. Only play the hands where you have an edge. Don't swing at everything!
 
I was debating whether to post this, markets trend and chop, but when they trend you want to be there to get paid. Chop to me and getting stopped out is paying tuition to the market, you have to have a system that captures the big swings to come out ahead, good trading all. :)

slv 60 minute
 

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FAST MONEY'S LINE-UP FOR THE WEEK OF APRIL 25th

Check out the guests lined up for next week when Fast Money broadcasts live at 12:30p ET and 5P ET from the 3rd annual SALT Conference at the Bellagio in Las Vegas!

AT HALFTIME

WEDNESDAY, MAY 11th
- Sam Hocking, BNP Paribas Global Head of Prime Brokerage Sales

THURSDAY MAY 12th
- Leon Cooperman, Omega Advisors Chairman

FAST AT 5PM

WEDNESDAY, MAY 11th
- Chris Hyzy, U.S. Trust Chief Investment Officer

THURSDAY, MAY 12th
- Jon Corzine, MF Global CEO
- Mark Fisher, MBF Asset Management Founder & Chief Investment Officer
 
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