The ACD Method
- Thread starter sbrowne126
- Start date
Seriously. I need to hire an assistant. Baron just ain't paying me enough.
Work with me people!
Shan B here is a book for you, not saying the grail is in there but its interesting to see how others look at the world. This guy is a character and I believe has posted here on et. By the way there are some major players that post on et along with the trolls. You would be shocked if you knew who some of them were and just how good they are at what they do. I would also recommend market wizards, you can find the pdf online for free at this point. To me this is the bible, the risk mgmt works 30 years later not to mention the psychology.
http://www.amazon.com/Trade-Like-Hedge-Fund-Uncorrelated/dp/0471484857
http://www.amazon.com/Trade-Like-Hedge-Fund-Uncorrelated/dp/0471484857
Enjoying my vacation . while going through some old posts of ACD thread, came across this from Maverick. It's priceless.
I never did the back test so it was interesting to see your results. I pretty much expected that to be the case. Here is what I like about ACD. The idea in trading, like anything in life, is to look for the opportunity that others are not seeing. Head and shoulders, reversals, doji's, 200 day moving averages, moving average crosses, support and resistance, etc, everybody sees that shit. It's plain as day. Hell if you miss any of that stuff, CNBC will point it out to you to remind you. There is no edge in anything that everybody can see right in front of them.
So the idea is to become a good price action trader and ACD allows you to see price action better then any other method I have seen. This is why it's hard to back test ACD as many have tried because they are back testing simple binary action. The idea is to identify price action that is NOT obvious to everyone else. ACD is one of those things you just have to practice like tennis. The more products you watch, the better your feel will become.
Because ACD is a price action based methodology, others can't take your edge away from you. You know the old saying, if everyone does it, then it won't work anymore. That doesn't apply here. If you can learn to master ACD, you can keep your edge into perpetuity.
I never did the back test so it was interesting to see your results. I pretty much expected that to be the case. Here is what I like about ACD. The idea in trading, like anything in life, is to look for the opportunity that others are not seeing. Head and shoulders, reversals, doji's, 200 day moving averages, moving average crosses, support and resistance, etc, everybody sees that shit. It's plain as day. Hell if you miss any of that stuff, CNBC will point it out to you to remind you. There is no edge in anything that everybody can see right in front of them.
So the idea is to become a good price action trader and ACD allows you to see price action better then any other method I have seen. This is why it's hard to back test ACD as many have tried because they are back testing simple binary action. The idea is to identify price action that is NOT obvious to everyone else. ACD is one of those things you just have to practice like tennis. The more products you watch, the better your feel will become.
Because ACD is a price action based methodology, others can't take your edge away from you. You know the old saying, if everyone does it, then it won't work anymore. That doesn't apply here. If you can learn to master ACD, you can keep your edge into perpetuity.
If anyone is curious a wider monthly pivot range on EUR/USD is slightly predictive of a wider range the following month. That goes against the narrow pivot range/wide range concept.
Actually all the stats I have ran on all timeframe show that volatility is predictive of further volatility.
I think if you do believe narrow pivot range predicts a volatile period you might as well use narrow range instead of pivot range, because the two are extremely correlated. By that I mean that a wide range session will usually produce a wide pivot range. I guess that can be helpful for trading purposes because my stats show that volatility predicts volatility. So if a wide range day leads to a wide pivot range the following day that is appropriate because you need wider stops and targets.
Actually all the stats I have ran on all timeframe show that volatility is predictive of further volatility.
I think if you do believe narrow pivot range predicts a volatile period you might as well use narrow range instead of pivot range, because the two are extremely correlated. By that I mean that a wide range session will usually produce a wide pivot range. I guess that can be helpful for trading purposes because my stats show that volatility predicts volatility. So if a wide range day leads to a wide pivot range the following day that is appropriate because you need wider stops and targets.
You want to know what I have noticed this same thing. I ran some correlation studies in a variety of instruments and found that if anything there was a slight positive correlation between volatility in the current period and the prior period. This was on an intraday timeframe.
When I was playing some breakouts in stocks with a NR7, N4, and IB I was noticing that they were duds much of the time. Maybe there is a different way of looking at it that i have not came across yet.
For those that look at these patterns here is a website that shows these NR and WR patterns for the wide universe of instruments:
http://www.mypivots.com/
Ill throw out a little bone here ala Mav. Well alot of this has probably already been said by him and different times throughout the thread.
Been running a log of my mean reversion trades and have found a strong correlation between the size of the OR and the success of trades. I am using a 20 minute OR. For about 100 trades:
-Fades with an OR< 40% ATR(10)
Profit factor= ~.9
Winning %= 40%
-Fades with an OR>40% ATR(10)
Profit factor is=2.7
winning % is =65%
These are trades with 20 minute OR's, comply with my other conditions for non-skewed stocks, and are at the second standard deviation of the VWAP. In other words meant to be mean reverting.
If you prefer taking the breakouts you can reverse engineer this and add some other stuff and you can have a good breakout approach! In fact I have noticed on the smaller OR's the fades have a very high failure rate
Some things I've noticed for breakouts...use a 5-minute OR, for the OR size as a % of ATR just adjust to account for the shorter time period. Don't fade the pivot. Look at relative volume to avoid the bots. You got yourself a nice little system.
Been running a log of my mean reversion trades and have found a strong correlation between the size of the OR and the success of trades. I am using a 20 minute OR. For about 100 trades:
-Fades with an OR< 40% ATR(10)
Profit factor= ~.9
Winning %= 40%
-Fades with an OR>40% ATR(10)
Profit factor is=2.7
winning % is =65%
These are trades with 20 minute OR's, comply with my other conditions for non-skewed stocks, and are at the second standard deviation of the VWAP. In other words meant to be mean reverting.
If you prefer taking the breakouts you can reverse engineer this and add some other stuff and you can have a good breakout approach! In fact I have noticed on the smaller OR's the fades have a very high failure rate
Some things I've noticed for breakouts...use a 5-minute OR, for the OR size as a % of ATR just adjust to account for the shorter time period. Don't fade the pivot. Look at relative volume to avoid the bots. You got yourself a nice little system.
Quote from Shanb:
Ill throw out a little bone here ala Mav. Well alot of this has probably already been said by him and different times throughout the thread.
Been running a log of my mean reversion trades and have found a strong correlation between the size of the OR and the success of trades. I am using a 20 minute OR. For about 100 trades:
-Fades with an OR< 40% ATR(10)
Profit factor= ~.9
Winning %= 40%
-Fades with an OR>40% ATR(10)
Profit factor is=2.7
winning % is =65%
These are trades with 20 minute OR's, comply with my other conditions for non-skewed stocks, and are at the second standard deviation of the VWAP. In other words meant to be mean reverting.
If you prefer taking the breakouts you can reverse engineer this and add some other stuff and you can have a good breakout approach! In fact I have noticed on the smaller OR's the fades have a very high failure rate
Some things I've noticed for breakouts...use a 5-minute OR, for the OR size as a % of ATR just adjust to account for the shorter time period. Don't fade the pivot. Look at relative volume to avoid the bots. You got yourself a nice little system.
My first thought is to wonder if you are having greater success because:
1. The OR size changes the nature of the rest of the day
or
2. The A level is moved further out so your A level is closer to the extreme side of normal moves, which would increase likelihood of a fade trade suceeding.
To clarify are you only entering if A level corresponds with 2 STD of VWAP?
I am assuming unlike me lot of traders do not have time to go through old posts of ACD thread. For those, who still remember these old posts, they are worth repeating. Going through old posts of ACD thread while on vacation has been good for me. Here is another one from Maverick.
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.
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.