The ACD Method

Quote from Maverick74:

And last but not least, let's look at AAPL which is really a separate asset class. Let me warn people right now who are trading AAPL based on the overall market or who are using AAPL as an indicator. There is absolutely positively no correlation right between AAPL and the market. I think AAPL could go to 750 with the ES correcting 10%. I'm dead serious. It's a totally different asset.

This means you should NOT sell AAPL because you think the market is breaking down. Nor should you sell the market because you think AAPL is overbought and will fall and therefore take the market down with it.

Let's look at the levels. AAPL is currently sitting right at it's monthly A up which is 637. This alone should tell you something. The ES has broken it's monthly A down and AAPL is at an all time high!!!!! Price action people, price action!

The QTR A up in AAPL is 652.37. AAPL has blown through it's QTR A up levels for the last 4 QTR's. And I mean blown through them like they were not even there. With that level being so close I think it's given that AAPL will try to test it.

However, there is no reason in the world to be shorting this name when there are so many stocks that won't even uptick when the Dow is up 500 pts. Those are the stocks you want to short, not AAPL.

Along the same vein, let's look at PCLN. It also is making a monthly A up! That level is 749. So again, ES below monthly A down and PCLN above monthly A up. Do NOT short this!

The QTR A up is 779. Good bet we test that level.

Both these stocks will eventually trade through 1000. That's what strong stocks do. They take out big levels.
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Both AAPL and PCLN hit these QTR targets. PCLN topped at 775 with the QTR A up at 779 and AAPL at 644 with the QTR A up at 652.

PCLN came in 50 pts after the QTR failure.
 
Just an update on the gold trade. I'm neutral at this point, it's been a decent short thus far, but the price action along with the, "you never know what the Fed might do" factor has me flat here.

Might return to the trade, but I need more data, (that I don't have yet). I tend to think the lousy jobs report changed the nature of this trade somewhat.

Coffee bounced off the monthly A down two days in a row, (this latest bounce seems to have held up today). Derivatives are working well, (SBUX and DNKN) with SBUX my fav given it's confirmed monthly A up for April. This is what I think Mav is talking about when he says dislocation. I took SBUX from the weekly A down yesterday to a "test" of the quarterly A up today, (that's 56.55 on my weekly A down, and 59.39 on my quarterly A up).

Meanwhile, the SPY tested the quarterly A down yesterday, SBUX is relative strength.
 

Attachments

Looks like SBUX just isn't ready to quit yet. My quarterly level is, (or perhaps I should say was) 59.39, and it seemed to make short work of that today. Went out in the after-hours at 60.80.
 
Quote from kinggyppo:

bump.
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King where you been? Nice move in AAPL this week 644 to the 600 level. You know that the last things to be taken out in a correction are the stronger names. Weekly Aup to Weekly adown!
 
Quote from Maverick74:

Yeah, if you want to buy volatility, buy Bonds!
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bump.




+1 as they say on this site. Where is the downside to that trade since last summer? Volatility had to be sold after approx Oct 1 2011. Long TVIX
clocked me overnight more than once back then.

How low can rates temporarily go if there is a lot of fear? Rhetorical but any thoughts appreciated.
 
I want to talk about a subject that we haven't touched on alot in this thread. Talking about the psychological aspect of trading. Since trading is a performance based activity I think it is a critical part of applying and executing with ACD.

This game is a very honest game...the ultimate judge of your performance will be your P&L. So how can we maximize our performance and add to the bottom line? Well, given that one has a the basics down execution becomes the most important factor.

Execution is key and proper execution requires a clear, focused, and objective mindset. Knowing when to push yourself and knowing when to take a step back.

So does anybody have any rules of thumbs to manage your trading and executing effecienctly and effectively. How do you get into rhythym and gain momentum. How do you know when to take a step back, or push on the accelerator. Or do we all just sit back and hit the buy sell button after our 1-2-3 setup? :)
 
Quote from Shanb:

I want to talk about a subject that we haven't touched on alot in this thread. Talking about the psychological aspect of trading. Since trading is a performance based activity I think it is a critical part of applying and executing with ACD.

This game is a very honest game...the ultimate judge of your performance will be your P&L. So how can we maximize our performance and add to the bottom line? Well, given that one has a the basics down execution becomes the most important factor.

Execution is key and proper execution requires a clear, focused, and objective mindset. Knowing when to push yourself and knowing when to take a step back.

So does anybody have any rules of thumbs to manage your trading and executing effecienctly and effectively. How do you get into rhythym and gain momentum. How do you know when to take a step back, or push on the accelerator. Or do we all just sit back and hit the buy sell button after our 1-2-3 setup? :)
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Shan I am well thanks for asking. I think new people overtrade, and take too much risk. In other words people swing for the fences instead of trying to hit singles, EVERY trader is guilty of this. Nothing like being wrong on a big trade, this is when if you don't honor your uncle point you have major problems. No one escapes risk mgmt, look at Corzine and Paulson as two quick examples. That is why the Larry Hite chapter of Market Wizards rings true still.
 
Quote from kinggyppo:

Shan I am well thanks for asking. I think new people overtrade, and take too much risk. In other words people swing for the fences instead of trying to hit singles, EVERY trader is guilty of this. Nothing like being wrong on a big trade, this is when if you don't honor your uncle point you have major problems. No one escapes risk mgmt, look at Corzine and Paulson as two quick examples. That is why the Larry Hite chapter of Market Wizards rings true still.
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I think this is an interesting topic and I'm interested as well. I think I'm decent with regard to risk management, (initial take, total position size throughout the trade, and honoring my stop). Something I'm interested in learning more about, (and I think, if I understood correctly Shan as well) is how do I know when I'm "right" my edge is "on" or I'm on a winning streak/have the wind at my back, and take on that full sized risk, or really press a winner.

Fish talks about this a lot I think in The Logical Trader, this idea of knowing when to let a winner really run, and maximize your size, versus killing off a loser. I can identify a loser and cut it without getting crushed now, (not an easy task, but an important one to learn obviously) but I'm finding that there are times where I should have pressed harder, I should have taken that extra trade, or I should have let a little ride.

A good illustrative example would be SBUX this week. What a trade! Weekly A down to confirmed qtr A up. I initiated, maximized my position size as it continued to work, covered half at the weekly A up, and let some ride into the highs of Wednesday where I took the remainder off, but it ended up confirming the quarterly and running a few more bucks. Now don't get me wrong, I don't want to come off as ungrateful, (it was a good trade, period) I executed flawlessly, and I know I can't get hurt replicating this performance, but I think I need to learn how to recognize when the blind mouse found the brick of cheese, (not just a crumb) and stay with it.

Shan, jump in if I'm not quite conveying what you're getting at. I know Mav's said a million times that letting a winner run is harder than cutting a loser, so this might just be another one of those things where I need more screen time, (which is totally valid) but any advice is extremely appreciated.

King, thanks a ton for your reply as well, much appreciated.
 
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