Quote from Maverick74:
A big part of trading futures is not getting stopped out. So it's very important for me to avoid crowded trades and taking obvious trades because those trades will have the most stops and the most whipsaw. In a perfect world you enter in areas on a trend where no one else is. This gives you that level all to yourself and minimizes the risk of getting stopped out. It's important to note what RCG said in that what is nice about ACD is you don't over trade. You don't get long, then stopped out then get long again only to get stopped out and then long yet again. It's one shot. So stop placement and entry areas need careful consideration. This is irregardless of A levels.
I agree with your whole comment. I think this particular paragraph nails why, in my opinion, this method has value over anything else I've seen on ET so far. The reason is because, as you say, you're trying to enter in a low liquidity environment where few take positions. Volatility expands, price moves to a level where more take notice, and your risk of being stopped out on the resulting churn is reduced.
Let me try to clear up some things here. I won't go into much more detail in the future -- I'm just getting the impression I'm confusing some people in where I am raising disagreements.
Your ability to establish a bias, and get in before a volatile move in a thin environment, rests on the premise that there is a correlation between the opening range, historical volatility, and future behavior. This all works beautifully for me because it's simple and makes perfect sense based on auction market theory.
You and Fish point out that lots of things can be adjusted while remaining consistent with that core premise. Adjust the OR on the fly to fit relevant early activity? Using a longer OR to look at longer moves? Change your ATR variables? Enter on A or C failures at the previous pivot range? All well and good.
The only things I disagree are anything that contradicts that premise two paragraphs above. The idea that any special snowflake can choose <i>any</i> OR is flipping a coin to me. Also, the entire concept of an OR on a longer term chart, for instance, might itself warrant discussion. I thought all of this was already baked in to the discussion -- this is what I'm trying to stimulate for my own and others' benefit.
My primary method is medium-term trend following. I track the relative rate of change of several baskets of instruments to inform my directional bias. I exit on either a change in those baskets, on a risk stop, or on an ema in extreme vol environments. I do not look at the intraday price action of the indices I trade for signals.
So, I'm looking to expand the instruments I trade (those baskets don't fit cotton, for instance), and also use various ACD lenses to help me leg into index positions at better times, so I can take on more size relative to my stop.
This is my attempt to be crystal clear on where I'm coming from and why I'm trying to dig into the specifics of how and when the theory works by talking with others.
