Quote from Maverick74:
The 30 day measures more long term trend and plays a large part in timing the various cycles. It also measures the quality of the given trend. Think of the number line as your vitals in your body. And your actual outside appearance as the price chart. Many people look healthy on the outside when in reality they are very unhealthy on the inside. Price charts work the same way. Many times a chart will look smooth, trending and orderly when in reality, the internals of that trend are lacking. The number lines are the aggregate measure of the daily vitals of various products. It allows you to "confirm" what you are seeing on the chart as real and make sure it is not illusory.
The monthly line corresponds to a "particular" cycle, in this case a segment of time of one month. It is married together with the monthly ACD levels. So when you get to monthly A level, you "check" the vitals. That's the monthly number line. If the monthly line confirms what the A levels are telling you, it gives you the confidence to take the trade. If it is not confirming it, then you reject the trade.
The 5 day follows the same course. It also measures a part of the cycle, in this case, the most recent 5 days. Since momentum, like energy, is very short lived, you need to be very cognitive of when you are in a momentum phase. For example, you do NOT want to short something that is experiencing a burst of momentum. The thing with momentum is that because it's life cycle is so short, it's raw energy is very high. Much like energy in nature. Ideally you want to see this energy ignite at breakouts or the beginning of a trend.
At the same time, the "lack" of energy is equally telling. If you are about to take a breakout trade and the energy is simply not there, then there is a very good chance you are chasing a false breakout or you are getting in at the end of a move vs the beginning.
ACD works very much like the laws of nature. There are patterns and cycles, periods of equilibrium and periods of instability. This is why I stated before it's absolutely imperative that you recognize what cycle you are in as well as how far along in that cycle you are. Remember, ACD is three dimensional. It's price, time and volatility. Simply trading off price alone will not get you very far.
