Number lines...
The ACD Method
- Thread starter sbrowne126
- Start date
A bunch of chatty Catheys today...
Number lines continue to look awful. Terrible price action today.
A note on something Quon mentioned to me. One thing I see over and over is after an A confirmation price will most always test the a level and either consolidate or fail at the test and continue on the breakout.
Anybody notice this as well and have any setups on the higher time frame confirmations?
Anybody notice this as well and have any setups on the higher time frame confirmations?
Thanks for link. I think your explanation is poor though.
There are typically 2 ways to trade spreads: relative strength (you expect one to outperform) or mean reversion (expect spread to collapse). If you play relative strength you buy A hoping it continues to outperform B. If you play mean reversion then you sell the stronger and buy weaker.
The basic idea behind spreads for mean reversion is the law of one price. Basically, similar products are interchangeable. In terms of relative strength, there are many ideas behind that too. One might might look for fundamental reasons, for example, might think company A is stronger then B and will outperform. There are many books on spreads at Amazon.
What Maverick has spoke about in spreads (in relation to me and others), is how proprietary firms will trade spreads. Often for example spreading a cash market with futures. This could be for arbitrage or something longer term. You might for example create a basket of stocks that you think will outperform the indices but you're making a relative bet, so you buy stocks and sell the futures.. Or you could spread a future against a future.. creates a calendar spread.
Typically for pairs for mean reversion.. you want them to have some correlation, a high correlation to be exact. You want a high correlation because it implies the stocks move together. A high correlation isn't enough though, they need to get "out of line" at times to make a profit. FOR relative strength spreads, you want an inverse correlation.
There are typically 2 ways to trade spreads: relative strength (you expect one to outperform) or mean reversion (expect spread to collapse). If you play relative strength you buy A hoping it continues to outperform B. If you play mean reversion then you sell the stronger and buy weaker.
The basic idea behind spreads for mean reversion is the law of one price. Basically, similar products are interchangeable. In terms of relative strength, there are many ideas behind that too. One might might look for fundamental reasons, for example, might think company A is stronger then B and will outperform. There are many books on spreads at Amazon.
What Maverick has spoke about in spreads (in relation to me and others), is how proprietary firms will trade spreads. Often for example spreading a cash market with futures. This could be for arbitrage or something longer term. You might for example create a basket of stocks that you think will outperform the indices but you're making a relative bet, so you buy stocks and sell the futures.. Or you could spread a future against a future.. creates a calendar spread.
Typically for pairs for mean reversion.. you want them to have some correlation, a high correlation to be exact. You want a high correlation because it implies the stocks move together. A high correlation isn't enough though, they need to get "out of line" at times to make a profit. FOR relative strength spreads, you want an inverse correlation.
Hi, thanks Mav and all the great contributors. I'm learning the numberline and having a hard time deciding if today's ES numberline value gets a 0 or -1. Based on my levels I have price failing to make an A down, then failing to make the A up, then making an A down late in the day, and then closing within the opening range. Thanks.
Hi Snaggleteefs,
One of the lectures posted in the past here mentions that 100 traders will have 100 different number lines, that said, without looking at anything but what you've posted, (and based on Fisher's work) any trend day that confirms an A, (be it up or down) but finishes in the opening range, (again, according to Fish) would be a 0 day.
Hope this is helpful.