When you think of the amount of money these hedge fund managers have made in compensation the last 5 years for doing absolutely nothing, it's really mind boggling. As the saying goes.....good work if you can get it.
The ACD Method
- Thread starter sbrowne126
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When you think of the amount of money these hedge fund managers have made in compensation the last 5 years for doing absolutely nothing, it's really mind boggling. As the saying goes.....good work if you can get it.
I'm sure you discussed this already, but maybe you could share how do you choose products you to track? Its kinda interesting aspect of trading as it is closely related to opportunity costs so choice must be measured.
P.S my coffee NLs are positive just to be clear
My focus is based more on fundamentals in terms of areas of interest. And to clarify, I'm not saying I'm using fundamentals for my decisions, but simply to create a macro thesis. For example paying close attention to the oil related currencies with the huge weakness in oil.
Mav, have you found that the more popular, high-profile markets like oil are crowded by traders and have less opportunity than markets that don't get as much attention? Or do you stick with the big popular and highly liquid markets and just trade them really well?
Couldn't agree more boss. I enjoy reading others confirms.
>Gold (GLD) has been an interesting number line for some time. Went positive on 9/18 and then fell back to a zero on 10/5. Flogged around since then and confirmed negative on Friday. Back on 9/30 and 10/1 when it pulled back to the 7 touch TL, it was a positive 30 day and made a nice up move of 6%. (Silver [SLV] also confirmed negative on Friday.)
>Further proof that small and midcap are not participating: My small cap index (IJR) NL confirmed negative on Friday.
>My dollar ETF (UUP) confirmed positive on Thursday. First time since 4/2/15 and that only lasted about three weeks.
>Further proof that small and midcap are not participating: My small cap index (IJR) NL confirmed negative on Friday.
>My dollar ETF (UUP) confirmed positive on Thursday. First time since 4/2/15 and that only lasted about three weeks.
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Mav will have a good answer for this T13.
I just did a quick search function thru some of Mav's Underground ACD book and a few of his past quotes on this general subject may be of interest:
11-10-13 03:24 AM
OK, so I use OCT for the beginning of the QTR following the typical business calendar year. I had a perfect QTR failed A up to the tick in the Euro and guess where it traded down to? You don't have to guess, you know. It traded down to the QTR A down. Now on my numbers we have a confirmed monthly A down for Nov and a deteriorating number line. I have a -5 on the 30 and a -5 on the 5 day showing the negative downward momentum.
At this point, I wouldn't touch the Euro. You had the sick move to the upside as well as that perfect fade at the QTR level. Don't keep going back for more. This is what most traders really struggle with. They keep going back to the well. When you get a great move in anything whether it's TSLA, Oil or the Euro, take the money, thank the market and move on. There are psychological reasons for this btw. Whenever you get a "clean" move in any product, all the traders who missed the move now take notice. Now that it's "obvious" to everyone, the "fools rush in". This makes the product sloppy and the noise level goes up considerably.
Let's go back to my US Steel example. When I posted that trade, it was NOT obvious. The move off that level was as smooth as a baby's ass. Now, every Tom, Dick and Harry sees that X took off like a rocket ship. So some guys will try to fade it, some will try to buy new highs, some will try to buy pullbacks. But they all will TRY "something". I call that traffic or noise. X might keep going higher, but it's going to make a lot of noise doing so. The easy money was made "before" it was obvious. This is the part 99% of all traders simply don't get. You have to catch the move when no one is involved. This is why I often chide guys on ET who try to pick tops in the market. They are trying to short the market after it's gone up 30 days in a row which sounds completely logical right? The issue here is not whether the trade has value, but how much noise you have to deal with to capture that value. Noisy trades are VERY hard to execute.
Think of it like trying to date a hot girl who "knows" she's hot. That relationship is going to be very messy. There might be perceived value there, but what are you going to give up to realize that value. A friend of mine once joked (correctly so) that you want to find a hot girl who doesn't know she is hot. LOL. Anyway I digress. The point is, there are two aspects to every trade. Discovering value and calculating what you are going to have to give up in order to capture that value. Finding the value is only one half the battle. Anybody can say short the market, it's overbought. But that is a lousy trade because the whole world is trying to execute that trade. Traffic!!!!!
Write this down on a post it note and put it on your computer monitor:
GET INVOLVED IN TRADES NO ONE ELSE IS INVOLVED IN.
LOOK FOR VALUE WHERE OTHERS ARE NOT.
BE FIRST TO THE TRADE.
4/23/14
You are forgetting one of the most famous ACD axioms...
4/23/14, Originally Posted by kinggyppo
refresh my memory.
What is obvious....is obviously wrong.
12-21-11 04:57 PM
I don't like to fade the number line although I'm sure there is a way to do it. Why buy weakness when you can buy strength and vice versa?
Also, I had a confirmed monthly A down on oil with a very negative number line. Once we made the weekly A up which was right near the monthly A down, I would leave the trade alone. Again, I think you and I are very different traders since you obviously are focused on one product. To me, I'm not "looking" for trades. I'm not trying to find a long or short everywhere. I want trades to fall in my lap. I want them to be easy. I want them to be smooth. I want to understand them. I'm sure one could day trade CL and make 100 trades a day. That's just not how I trade.
See MBF, here's the thing. I know you don't trade stock, but that BMY trade could have made you 10 times more money than CL with 1/10th the stress. It's a cleaner trade with almost zero noise. I look for those trades.
I've been trading for about 15 years. And I'll tell everyone this, if you want to stay in this game for the long term, you need to find a way to reduce the noise and lower the stress. Over time, the noise and stress become unbearable. Not when you are Johnny one lot and excited as hell to be swinging trades all over the place, but as you get older and you derive most of your income from trading, you are going to want to trade smoother moves and products to keep your sanity. Again, these are just my words of wisdom here. Not trying to tell anyone they are right or wrong in how they trade. I've been in this game for awhile and I saw 98% of the guys in my prop group blow out. I know this game. I know the rules. I see what happens. I’m just sharing my experience
02-03-12 07:39 PM
The whole idea behind ACD is seeing things other people are not seeing. It's like being able to wear night goggles at night. Everyone else sees darkness, you see light. Being able to recognize things that are NOT obvious is what trading is all about. Things that are not obvious are cheap; things that are obvious are expensive. That should make intuitive sense to you. Think of placing a bet. Any bet that had close to a 100% chance of winning is only going to pay out a very little amount. A long shot bet that no one thinks will win will pay out huge. Trading works the same way.
12-22-11
No, I don't think I explained this well enough. When I use to trade stocks. I traded big moves. But not big stocks. In other words, take a stock that has an avg ATR of 1 pt a day like TIF. I would trade the stock when it moved 5 pts.
You just want to avoid the noise. Trading everything everyone else is trading is going to frustrate you. Perfect example in fact was the Euro. The whole world has been short that pair. And during the Euro debt crisis it rallied! It refused to go down because everyone and their brother were short.
I have spent a lot of time discussing this on this thread further back. If everyone is trading the same product, the moves are not very clean. They are messy if only for the fact that there are stops everywhere at every tick. I'm not saying to trade things that don't move. I'm saying trade things that are moving that don't usually move much! I hope this helps.
12-17-11 03:01 AM
I think I told this story before on this thread. Back in the day when I was an active equity daytrader, I was at this firm in NY and I was talking to another trader. We would share notes and ideas everyday on what to watch and so on. I would always pull up these stocks that had big moves the previous day and would say, I'm going to watch this today. And this guy would say why, the move already happened, it's over.
Then he would show me the stuff he was going to watch and I would say, why are you watching that, that thing doesn't move? And he would say, that's the point, it hasn't moved yet, I'm anticipating it moving today. And I would look at the chart and ask him how the hell did does he know that. And he said, I don't, you just have to put the pieces together.
I really think this is what 95% of the guys on here don't get. You can't trade the obvious. You can't trade yesterday's move, today. At some point, you are going to have to get in first or early and anticipate something happening. And that takes a lot of work. No shortcuts.
12-21-11 04:48 PM
I would warn guys about trading the products that give one the most "bang" for their buck. I have talked about this on here relentlessly about avoiding crowded trades. The heavier the traffic, the harder it is to trade because the noise level is unbearable. This includes stuff like the CL, the Euro, ES, AAPL, FAS and FAZ, etc. And certainly Gold.
I made a very-very nice living trading listed stocks that no one on this thread has even heard of. Sitting there all by myself with the specialist and catching smooth moves. Newbie traders will never make money trading noisy products no matter how much bang for the buck you are getting. And professionals know better.
Just my opinion of course and I'm often wrong.
Damn. There is some good stuff there. Hell even I like reading my old stuff.
OK, so just to address this question. In my humble opinion, there is probably 10 times as much upside with 1/4th the volatility trading stocks over futures. Why? Simple math. You have thousands of stocks to hunt for. With futures you have maybe 25 to 50 good products. When stocks confirm (especially stocks that no one is watching), those things can run and run and run.......and run some more. Futures just don't behave that way. Here is what I try to tell guys regarding futures, FX included. If you are dead set on only trading them, you need to find it in you to become the most patient person in the world. You MUST develop that trait. Because you need to wait and wait and wait for "that" move. If you try to keep trading the same thing you are going to chop yourself and give back all the money you do make on the big moves.
Take CL for example. Look, you either caught it or you didn't. We confirmed around 75 to 80 on the downside and traded down to the mid 40's when it re-set. If you missed it, then you know what, you missed it. Do NOT go in there and buy it and sell it and sell it then buy it, then spread it against this or that then that and this. You will absolutely give back whatever you made on that "smooth" move on the downside and if you missed it, you will dig yourself in such a hole that no move will be big enough to get you out.
Same for Natural Gas short. The long USD/JPY trade. The long ES trade. The Long Bond trade. If you caught the clean move, the one no one believed would happen. Take your chips to the cash window and cash out. Do NOT hang around when the crowd shows up. This is where trading has a lot in common with good poker. A great poker player can sit for hours and hours and hours on end checking his bet, paying the ante and never making a move. He buys his time and waits. His cards may never come. But when they do, he executes. Bad card players play everything. They want to be "involved". They think they can turn every hand into a winning hand. And they leave the table broke. Do NOT be that guy.
With stocks you don't have to be as patient because if you put in the work you will find "something" out there. It might be a company that makes thumb tacks in Canada that is confirming for the first time in a year and NOBODY is watching it or even cares. That stock will confirm at $25 a share and trade to $100 before resetting with almost no retracement. You just can't find those trades in Gold or the Euro or WTI. There is a downside though. It is a LOT of work. Maintaining equity number lines is an up at dawn 7 day a week schedule that will pay off but you need to really believe in what you are doing. All of this should be intuitive. But it's here regardless.
With thousands of stocks out there, where do you even start Mav? I mean, I don't think it's feasible to keep track of hundreds of NLs.