The ACD Method

[baggerlord]

Quote from kinggyppo:

to me all of Fisher's strategies are breakouts, you want to get stopped out for a small loss when you are wrong, the reversion lets say to the open is what kills this type of trade.

I agree. I think the value in looking at stats like these is it can give you areas to watch. Say you got short today, once price entered that zone that contains most big moves you would take profit using whatever exit signal you like unless you had a specific reason to expect unusual downside today. That could be price action or news or whatever else you use.

Today once price made it down to that area it is extremely likely it will be the bigger of the two moves today, and once price made it back up above the open and approached open + .70 the odds of it failing increased with every up tic if we assume that is the small move side of the range. Not advocating any strategy based off that but I think it would help any trader to know what is "normal" behaviour and what will happen most of the time.

 

[kinggyppo]

Here is a dot on close chart, which is just that, a dot on the close of the bar, if you look at price action the last two days market dived on the open then traded back to the open. Obviously this rewards the dip buyers. There is a tradeable system here, fade the extremes with a tight stop. You are gonna lose when the mkt keeps trending in one direction but that's what stops are for.

 

[Maverick74]

Nice strong close again for the market. We bounced 15 handles off the low of the pivot range to close just above it. We have a nice tight pivot now for Monday right underneath.

Here is an update on the number lines I have for the products I follow.

ES 0

HG -2

CL +1

ZB 0

DX +1

GC +3

NG +2

ZC +4

ZS +5

ZW +4

SB +3

CT -7

KC +6

CC -1

LE +3

GF +4

OJ -1

 

[Shanb]

Quote from baggerlord:

This is the distribution of the larger move of the day. Ranges charted as below:

4.00 0.01 0.22
5.00 0.22 0.43
6.00 0.43 0.65
7.00 0.65 0.86
8.00 0.86 1.07
9.00 1.07 1.28
10.00 1.28 1.50
11.00 1.50 1.71
12.00 1.71 1.92
13.00 1.92 2.13
14.00 2.13 2.35
15.00 2.35 2.56
16.00 2.56 2.77
17.00 2.77 2.98
18.00 2.98 3.20
19.00 3.20 3.41
20.00 3.41 3.62
21.00 3.62 3.83
22.00 3.83 4.05
23.00 4.05 4.26
24.00 4.26 4.47
25.00 4.47 4.68
26.00 4.68 4.90
27.00 4.90 5.11
28.00 5.11 5.32
29.00 5.32 5.53
30.00 5.53 5.75
31.00 5.75 5.96
32.00 5.96 6.17
33.00 6.17 6.38
34.00 6.38 6.60
35.00 6.60 6.81
36.00 6.81 7.02
37.00 7.02 7.23
38.00 7.23 7.45
39.00 7.45 7.66
40.00 7.66 7.87
41.00 7.87 8.08
42.00 8.08 8.30
43.00 8.30 8.51
44.00 8.51 8.72
45.00 8.72 8.93
46.00 8.93 9.15
47.00 9.15 9.36
48.00 9.36 9.57
49.00 9.57 9.78
50.00 9.78 10.00
51.00 10.00 10.21
52.00 10.21 10.42
53.00 10.42 inf

The mean of the larger move is 1.08 vs .16 for the smaller move. Mean is the amount where half are above and half are below. For trading that might be more useful than the average.

You median is the middle of the distribution right? Looks good, seems like a relatively normal distribution.

Also with the fading and ACD. Its just like any other approach that you would have to make profitable. Any type of trading is going to require proper discipline, execution, and risk management. Most people don't have the chops to do this. If I am trading a breakout approach, you will get those days and weeks that no breakouts have follow through. You manage risk through these periods and take advantage of the good periods.


I am finding that OR size is extremely important to know if something may follow through or likely fade. The importance is TIME. Not accounting for time in the ACD equation is leaving alot on the table. You will notice that the best trends with the most follow through are going to come after you have some sort of price discovery period and one side is caught and a big move will proceed. Time is usually needed for one side to be positioned and then have to cover into a move. If a move just happens off the open in a volatile fashion, these are not usually the healthiest moves and many times I actually fade these moves with tight stops and catch some good trades. Don't fade the moves that have time to build, those can go! When you have people chasing, you get violent reactions in the counter-moves.

 

[Shanb]

Visa yesterday off of the open.

 

[Maverick74]

Quote from Maverick74:

Nice strong close again for the market. We bounced 15 handles off the low of the pivot range to close just above it. We have a nice tight pivot now for Monday right underneath.

Here is an update on the number lines I have for the products I follow.

ES 0

HG -2

CL +1

ZB 0

DX +1

GC +3

NG +2

ZC +4

ZS +5

ZW +4

SB +3

CT -7

KC +6

CC -1

LE +3

GF +4

OJ -1

I want to follow up a little on the number line. One of the things this is useful for when making longer term swing trades is to check the health of the trend. What we want to see are A ups. A quick glance shows us the strength in the grains even though they have not made monthly A ups yet. Corn already has 3 daily A ups, soybeans 2 and wheat 3. This gives you a lot of information about the "real" internal strength. Coffee has two plus 3 days already which is very impressive. This means coffee traded down to the A down level, held, rallied up and through the A up and confirmed and did that twice. Very impressive. Something that does NOT show up when just looking at a daily chart.

When we look at the risk assets we get a very mixed picture. There is absolutely nothing to lean on long or short which is why no one should be long or short. Between the ES, Copper and Crude we have no A ups or A downs in the spoos, Copper has just an A down and crude oil has one A up and one A down.

When we look at the flight to quality trades, we don't get any clearer picture. Bonds have only made one A up and so has the dollar index. There is absolutely no real strength or weakness to speak of in the risk assets and they should be avoided.

This is the real value of the number line. To look under the hood and see what is "really"' going on. As I've said before, I want to see two confirmed A trades before I take a monthly signal. Live cattle only has a plus 3 number line but it has made two A ups.

Coco as I mentioned before traded up to the monthly A and failed and sure enough it has a -1 number line. Obviously if the grains confirm next week, that is the trade you want to jump on by the number of confirmed A ups we have already had.

One of the things the number line has done for me is many times when it looks like the market is breaking down or breaking out, the number line is not confirming that price action. This has kept me out of a lot of trades that had no follow through and instead had violent reversals. I hope this helps bring some clarity to the number line approach.

 

[Samsara]

Quote from Maverick74:

I want to follow up a little on the number line. One of the things this is useful for when making longer term swing trades is to check the health of the trend. What we want to see are A ups. A quick glance shows us the strength in the grains even though they have not made monthly A ups yet. Corn already has 3 daily A ups, soybeans 2 and wheat 3. This gives you a lot of information about the "real" internal strength. Coffee has two plus 3 days already which is very impressive. This means coffee traded down to the A down level, held, rallied up and through the A up and confirmed and did that twice. Very impressive. Something that does NOT show up when just looking at a daily chart.

When we look at the risk assets we get a very mixed picture. There is absolutely nothing to lean on long or short which is why no one should be long or short. Between the ES, Copper and Crude we have no A ups or A downs in the spoos, Copper has just an A down and crude oil has one A up and one A down.

When we look at the flight to quality trades, we don't get any clearer picture. Bonds have only made one A up and so has the dollar index. There is absolutely no real strength or weakness to speak of in the risk assets and they should be avoided.

This is the real value of the number line. To look under the hood and see what is "really"' going on. As I've said before, I want to see two confirmed A trades before I take a monthly signal. Live cattle only has a plus 3 number line but it has made two A ups.

Coco as I mentioned before traded up to the monthly A and failed and sure enough it has a -1 number line. Obviously if the grains confirm next week, that is the trade you want to jump on by the number of confirmed A ups we have already had.

One of the things the number line has done for me is many times when it looks like the market is breaking down or breaking out, the number line is not confirming that price action. This has kept me out of a lot of trades that had no follow through and instead had violent reversals. I hope this helps bring some clarity to the number line approach.

Damn, fantastic stuff Mav. Many thanks for those detailed insights.

 

[Maverick74]

Quote from Samsara:

Damn, fantastic stuff Mav. Many thanks for those detailed insights.

Here is another way to look at it. You can treat the number line like a hand in poker. Knowing what beats what at the table. Obviously not all plus 2's are the same. An A up beats two failed A downs. A plus 3 day beats an A up. A plus 4 day is tricky. While Fisher assigns it a higher number value, in my opinion a plus 3 day trumps a plus 4 day. I rather see the product fail at the A down and make an A up then confirm an A down and then confirm an A up.

So think of the number line days like hands of poker and you will start to get really good at reading the market's hands at the poker table!

 

[Samsara]

Quote from Maverick74:

Here is another way to look at it. You can treat the number line like a hand in poker. Knowing what beats what at the table. Obviously not all plus 2's are the same. An A up beats two failed A downs. A plus 3 day beats an A up. A plus 4 day is tricky. While Fisher assigns it a higher number value, in my opinion a plus 3 day trumps a plus 4 day. I rather see the product fail at the A down and make an A up then confirm an A down and then confirm an A up.

So think of the number line days like hands of poker and you will start to get really good at reading the market's hands at the poker table!

You know, if I read the book another 10 times, I still wouldn't be able to come up with an apt metaphor like that. Creative stuff -- kinda rare in the trading business. Variations on a theme like that help to flesh out what the information is really able to tell you. Stays true to the purity ideas behind what price action is about too.

Good stuff.

 

[Maverick74]

Quote from Samsara:

You know, if I read the book another 10 times, I still wouldn't be able to come up with an apt metaphor like that. Creative stuff -- kinda rare in the trading business. Variations on a theme like that help to flesh out what the information is really able to tell you. Stays true to the purity ideas behind what price action is about too.

Good stuff.

Well, when I was young, I use to write science fiction stories in elementary school so I kind of developed a creative mind.

I wrote entire books. I use to get up and read some of them to the class. Kind of an odd kid.