The ACD Method

Hello all,

Great thread. I've read the whole thing "cover to cover" as well as The Logical Trader. It's amazing while reading the thread how all of my questions were answered as they arose in my head within the next 5-10 posts. Wanted to say thanks to all participants. Also I do have a question as to what you guys read/research/study as far as the news goes within the market as well as around the world? It may have been answered already in the thread but I was very focused on ACD related items vs. news. I did a search but couldn't really find anything. Might be a noob question so I thank you in advance for your advice.
 
I think I'm slowly progressing on trading ACD intraday.

Earlier today I went back to read about prospect theory and try to compare it with my experiences. Basically, all the 4 quadrants correspond to common mistakes I keep making. More about that elsewhere.

Anyway, I kept thinking to myself over the day: "Don't fuck with the stops"

Just now, I saw GBPUSD confirm an A-down. I shorted it. Looked at other GBP crosses. EURGBP also looked like it broke its A-up at the same time, GBPJPY too. I went long EURGBP, short GBPJPY.

GBPJPY also went down, but EURGBP after rising a bit, dropped back down. I looked at the EURUSD chart, saw it was going down, but when I went long EURGBP it hadn't quite broken its A-down yet. I got out at a small loss (time stop) for EURGBP because I saw it kept trading sideways and even poked back into the pivot range. The Euro and GBP were both dropping, but going long EURGBP means you think Euro will drop less than GBP, which was not necessarily a good bet.

When EURUSD confirmed its A-down I also went short on it.

I just let them all run, didn't fuck with the stops this time. GBPUSD dropped more and more, reaching almost 18 pips in profit for me at the peak before going back up a bit. The rest dropped but more subdued. Finally, when I saw GBPJPY keep trading sideways around the pivot, I decided to time-stop it out, and closed everything off for 15 pips total profit. It was a good decision, since they all went up shortly after I closed off.

So today my lesson was implementing the stops, playing them by the book.

Maverick has mentioned this before somewhere IIRC, that he's seen more traders lose out by setting too tight stops than setting wide stops. Colm O'Shea in Schwager's Hedge Fund Market Wizards says the same thing; a lot of people set too tight stops then make the same trade and the same mistake over and over -- he says it's a better idea to set your stops somewhere where you know you are wrong if the market moves that far, so you won't make the same trade again.

Another lesson was using different pairs to help me see things I might not see in just one pair -- like comparing the different GBP crosses. I mean I kinda just understood this a bit in theory, but I saw it and used it live today.

I hope each day I make more and more progress.
 
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TSLA made a nice confirmed A-up, I got in with a call, sold off shy a bit of the top when I judge the movement to be close to peaking from the low + the ATR.

GOOG and AMZN don't seem to be up to much today. GOOG went up a bit early on, but seems to have failed at my QAup level then it went back down, failed at the daily A-down.
 
Apollonius said:
TSLA made a nice confirmed A-up, I got in with a call, sold off shy a bit of the top when I judge the movement to be close to peaking from the low + the ATR.

GOOG and AMZN don't seem to be up to much today. GOOG went up a bit early on, but seems to have failed at my QAup level then it went back down, failed at the daily A-down.
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Can I offer some free advice? Try to avoid the "(TSLA, FB, AMZN, NFLX, AAPL) garbage and focus on stuff that NO one is watching or talking about. The ACD signals are MUCH cleaner. When I would find a name I liked I would go on twitter and search for the ticker. If no one was chatting about it, that was my girl. I know you can use ACD with anything. The idea is to use it to find the gems. Everyone is trading noise. Hence why they under perform benchmarks. Find the gems out there. No charge for this so you can do with it what you please. Welcome to the board. :)
 
Maverick74 said:
Can I offer some free advice? Try to avoid the "(TSLA, FB, AMZN, NFLX, AAPL) garbage and focus on stuff that NO one is watching or talking about. The ACD signals are MUCH cleaner. When I would find a name I liked I would go on twitter and search for the ticker. If no one was chatting about it, that was my girl. I know you can use ACD with anything. The idea is to use it to find the gems. Everyone is trading noise. Hence why they under perform benchmarks. Find the gems out there. No charge for this so you can do with it what you please. Welcome to the board. :)
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Mav,
Does the same logic apply to the Futures and/or Forex markets? Or are you only referring to Stocks in this instance?
 
sleepy said:
Mav,
Does the same logic apply to the Futures and/or Forex markets? Or are you only referring to Stocks in this instance?
More...
You ask a useful question. I will not try and answer it, because I would like to hear what Mav has to say too.

The 2 1/2 long pieces Mav wrote on FX clearly stated that a longer term view would be appropriate in his opinion. That together with something a chap called oldtime said way back, something is always trending, led me to trade a range of diverse instruments. Currently 33 fx pairs and maybe 12 futures or so, though I'm less active in the futures. For reasons I can't fathom, my signals are cleaner in FX so that's where I pitch my tent and cut the hole in the ice.

So I get an entry signal, my NLs confirm, I take it.

I've always wondered about those who use ACD to trade the same instrument every day. I would use just the levels, I wouldn't bother to have NLs if I day trade just one instrument. Did an exercise a while back on the fx pairs, number of consecutive up days and down days. 2 is very common, by the time you get to 5 consecutive days it is pretty rare.

No way NLs can keep up with mean reversion of that nature.
 
sleepy said:
Mav,
Does the same logic apply to the Futures and/or Forex markets? Or are you only referring to Stocks in this instance?
More...

It applies to everything. Crowded trades product excess variance. Variance lowers your risk adjusted return by definition (it's in the denominator). You are looking for "signal extraction" with the least amount of variance in your trade. That's where alpha comes from. Everything else is just adding leverage to index.
 
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