The ACD Method

Quote from drm7:

Interesting intraday A Down on ES today. By my calculation, the A Down point was right on top of the pivot, which would in theory make it a pretty juicy trade if it holds.
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I do not trade indices much anymore after i heard Mark fisher talk about they being hardest to trade per his method. But as we have volatility over last month- i am drawn to it.

Another key point per MF service- is the risk involved in $ terms in each instrument. He discussed this concept in his book.

for last 2 weeks 1 car of Big contract of spy is $7400 vs 2800 for CL. So, it makes it easier to decide which instrument to trade.
 
Quote from Quon:

Many thanks for the post. I'm finding it very helpful. Between this and the videos Mav posted a few weeks back I'm really looking at ACD in a much different way. Really supplementing the book itself.

Thanks to all for the great posts today. Much appreciated.
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One of the points Louie made at the end of presentation ( he has been trading with MF for 12 years) that there is lot of information in that book. Every time he reads it, something new comes up in mind or clears up an old set ups in a different light.

I could not agree more. I know of traders who had the book on shelves for years and never found it useful. Those type of traders typically tend to be system developers/ robot trading type.

Hi, per MF out of something like 8,000 traders he trained, 4,000 slept through his class. Out of rest of 4,000, 3,000 did not had discipline or did not wanted to join Bust your Ass club (lol).
 
Quote from Maverick74:

It's amazing how Lou actually uses the exact same language that I use to describe ACD and how to use it. If I didn't know any better, I would say Lou read this thread before doing the presentation. :)
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Now, we know the reason as to why you execute ACD concepts so successfully.
 
Quote from mfbreakout:

Now, we know the reason as to why you execute ACD concepts so successfully.
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I did not finish my sentence and Submit button got hit. One more try,

Now we know the reason why you execute ACD method so successfully because you are the ORIGINAL Lou (lol).
 
Quote from acdtrader:

Interesting stuff flip. Here is a similar study where I studied, what % of the time OR is the high or the low of the day.

"OR High" "OR Low" "OR Stat - High / Low"
Metals
GC 15% 18% 34%
SI 17% 19% 37%
HG 13% 20% 33%

Energy
CL 16% 17% 33%
HO 19% 18% 37%
NG 20% 19% 39%
RB 18% 17% 35%

Softs
KC 22% 19% 41%
SB 24% 19% 43%

I conducted my study from Jan 2008 to Dec 2010.

Fisher mentioned it was about 20% but in the last 2 years - its much higher and further increases your edge in OR breakout trades.

Thanks for your pointer on the OR of the month being high / low of the day. I will create an indicator and see if biasing your daily trades using beginning of the month - helps the system.
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Thanks, which time for the OR did you use in your study? 15min?

I think your analysis goes into the same direction as what I posted on 09-23-11 (see result for ES here: http://www.elitetrader.com/vb/attachment.php?s=&postid=3309115 )
Using an OR of 15min would give a percentage of 33% for "high or low", see bottom right plot.

The first hour in the ES develops as follows:

OR-time...percentage (high or low)
5min: 21%
10min: 28%
15min: 33%
20min: 37%
25min: 40%
30min: 43%
35min: 48%
40min: 51%
45min: 52%
50min: 55%
55min: 56%
60min: 57%

btw, acdtrader, which software/platform do you use for automated trading and which software for studies like this? I do most of the stuff in Matlab, partly also in R.
 
I used OR time as 10 mins in all commodities. Interesting to see that 60 mins is the high or low of the day 57% of the time. What commodity are you calculating these stats for?
By the way - flip, can you explain the results of your probability distribution from the link that you posted.

Thanks for sharing your results, I was trying to post an Excel file that shows all my results. Also it demonstrates that Overnight move is higher than intraday move at an average in a lot of cases. However I couldnt figure out a way to post the excel file as an attachment. Then I tried to post a link to the excel file and EtTrejected my post.

I currently use Multicharts for quick backtesting or protoyping an idea / indicator. I have used Matlab and R when I was in graduate school and at my previous firm. During the last couple of years, I have tried NinjaTrader, tradestation, open quant, quant house, streambase, Rightedge and pretty much most softwares out there. And I realized by trial and error that I needed to build something from scratch - which had backtesting, trading, optimization, record-replay of market data, strategy analyzer, scheduler etc which would work for high frequency trading as well as for Intraday scalping and TA strategies. I am 70% of the way there in terms of functionalities. This way once I write an indicator or strategy my code for backtesting it is the same as my real time trading.

Check out deltixlab - on google, it is the most sophisticated tool for an automated trader I have come across.
 
Quote from flip:

Thanks, which time for the OR did you use in your study? 15min?

I think your analysis goes into the same direction as what I posted on 09-23-11 (see result for ES here: http://www.elitetrader.com/vb/attachment.php?s=&postid=3309115 )
Using an OR of 15min would give a percentage of 33% for "high or low", see bottom right plot.

The first hour in the ES develops as follows:

OR-time...percentage (high or low)
5min: 21%
10min: 28%
15min: 33%
20min: 37%
25min: 40%
30min: 43%
35min: 48%
40min: 51%
45min: 52%
50min: 55%
55min: 56%
60min: 57%

btw, acdtrader, which software/platform do you use for automated trading and which software for studies like this? I do most of the stuff in Matlab, partly also in R.
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Something I might add is that the reason Fisher spent a lot of time talking about the significance of the OR is because back then he used that level as his stop. So knowing that those levels were much stronger then random support or resistance levels made the system very robust. However he has stated many times that in today's markets no one uses a stop that wide and therefore the likelihood of price taking out those levels is not as big a concern.

I guess what I'm trying to say is that I would not dwell on the significance of the OR times now.
 
Maverick74 - agree with what you have to say. The OR stop is too wide. However here is my thought process, and please feel free to critique what you think.

Let say: Lets say the OR is high / low of the day -> 30% of the time and every time I bet in the direction of the OR breakout, lets say I win $5. On the other hand, 70% of the time trades are either flat or I get stopped out and lose $2 in those stopped out trades.

Hence my expectancy on this trade over a long period of time would be: 0.3 X $5 + 0.7 X (-2) = $0.1 (lets ignore trading costs for now)

Its a very small edge, but If I could make this bet 1 million times across similar instruments that exhibit this property where the OR is significantly the high/low of the day than days when its not - that would be a good risk reward system.

Not to forget, we can factor in other conditions such as + / - days, number line etc that might increase the expectancy.

Hence - delving into the OR stats.

Currently I use a factor of volatility to put out my stops, sometimes its below the OR low and sometimes above the low for long trades. Its different from how Fisher teaches in the book, but in my experience - when the stops are too tight, one gets stopped out and if they are too wide, you are taking a lot of failed Aups thinking of them as AUp breakouts. Thats where your experience as a trader comes in maverick (which is what you have focused on sharing throughout the blog talking about how the ACD methodology vs a set of rules that one programs) - machines cant think, but they are very disciplined.
 
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