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The ACD Method
- Thread starter sbrowne126
- Start date
Quote from MBC:
Thanks
You dont put stops in strategc areas such as above/below opening range or A's ?
I use 45 minutes OR. based off that OR- stop loss are typically 100 ticks or more. I do not us 100 ticks stop loss. Thats why some traders use smaller time frame OR or figure out a way to use stop loss with 10 ticks. I believe on most days CL moves in 100 ticks cycle e.g if it fails at 100 , target becomes 99. If i want to be long at 99, stop loss is 98.90. if i want to short 100, stop loss is 100.10 etc
If, i get stopped out, have to find another level etc.
Set up a method. Have 3 profitable months in SIM ( if new to CL0 and then trade exact same size and set ups as SIM.
Otherwise, market will take money away
Quote from cipherscribe:
Mav,
I have just started reading the last few posts about trading these types of spreads. Whilst I agree that the ones that you have chosen to pick look like good trends, I can't really see anything different from these charts, and any equity that is having a good trend day.
So why pay twice the commission for the spread, when you can say, choose Citigroup and just trade it....
What's your reasoning behind why your spreads are better choice trades than the outright instruments themselves?
Adrian
The spread trade focuses completely on the relationship vs the asset. You remove the market from the equation. Sure, if the ES rallies and C is strong then C will most likely trend all day. But what if the market is not strong, what if it's choppy, what if it rolls over, what if it is weak. That spread should trend smoothly under all those scenarios vs the outright stock that will only behave that way if the market is strong and trending higher.
If you go back and read this thread I gave examples on how to short the market with the ES 100 handles lower. I showed spreads that actually trended higher with the ES even though you were expressing an opinion that the market would go lower. That is where spreads really shine.
Quote from Maverick74:
The spread trade focuses completely on the relationship vs the asset. You remove the market from the equation. Sure, if the ES rallies and C is strong then C will most likely trend all day. But what if the market is not strong, what if it's choppy, what if it rolls over, what if it is weak. That spread should trend smoothly under all those scenarios vs the outright stock that will only behave that way if the market is strong and trending higher.
If you go back and read this thread I gave examples on how to short the market with the ES 100 handles lower. I showed spreads that actually trended higher with the ES even though you were expressing an opinion that the market would go lower. That is where spreads really shine.
Mav,
I have been kind avoiding looking at spread trading, mainly b/c it went over my head. IS there a very basic link or read where I can learn about them?
I have looked around, but am having a hard time wrapping my head around it conceptually. In my limited reading, I do keep seeing that people think they have a tendency to "trend very hard" which ties in well, (obviously) with ACD.
For example I am looking at your line charts, but dont really get what the price or trend is representing. What does the actual "price" represent?
Quote from mdl060374:
Mav,
I have been kind avoiding looking at spread trading, mainly b/c it went over my head. IS there a very basic link or read where I can learn about them?
I have looked around, but am having a hard time wrapping my head around it conceptually. In my limited reading, I do keep seeing that people think they have a tendency to "trend very hard" which ties in well, (obviously) with ACD.
For example I am looking at your line charts, but dont really get what the price or trend is representing. What does the actual "price" represent?
OK, I'm playing around with the chart a little, hopefully this will help. I'm attaching a comparison chart of the DIA/FCX spread and comparing it to just being long SPY. You will see that SPY is up .30% today and this spread is up over 1.60% or 5 times as much and it's market neutral.
Attachments
From now on, I'll just keep posting the comparison charts so one can measure the spread against the SPX. It will make the p&l easier to understand.
Quote from Maverick74:
The spread trade focuses completely on the relationship vs the asset. You remove the market from the equation. Sure, if the ES rallies and C is strong then C will most likely trend all day. But what if the market is not strong, what if it's choppy, what if it rolls over, what if it is weak. That spread should trend smoothly under all those scenarios vs the outright stock that will only behave that way if the market is strong and trending higher.
If you go back and read this thread I gave examples on how to short the market with the ES 100 handles lower. I showed spreads that actually trended higher with the ES even though you were expressing an opinion that the market would go lower. That is where spreads really shine.
I'll check the earlier posts. Appreciate your efforts.
Adrian
Is part of the benefit you are pointing out that this type of trading is, possibly, less risky than just being long the spy outright?
Quote from Maverick74:
OK, I'm playing around with the chart a little, hopefully this will help. I'm attaching a comparison chart of the DIA/FCX spread and comparing it to just being long SPY. You will see that SPY is up .30% today and this spread is up over 1.60% or 5 times as much and it's market neutral.
Quote from bozwood:
Is part of the benefit you are pointing out that this type of trading is, possibly, less risky than just being long the spy outright?
I don't know if I would say less risky. I think it utilizes ACD very well. ACD is about price action and ACD levels help one recognize relationships very clearly. Spreads are a way of expressing that relationship. Spreads can be very risky if you don't know what you are doing. Although I firmly believe that mean reversion type spreading is far riskier. In order to really make that work you have to constantly average into losers. This type of trading you will never average into losers. If anything, adding to winners.
To be honest, this is a more advanced way of trading. So if you are not profitable now in what you are doing, spread trading is not going to make you profitable. Just as in trading options, you are adding layers of complexity.
Again, the reason I highlight them is because they do such a great job of telling you what's going on in the market.