The ACD Method

redbaron1981 · Mar 13, 2017

Is anyone noticing the spreading action of the 30day number lines across the sectors?

Robert Yanks · Mar 13, 2017

Hello RB,

Can you give some examples?

redbaron1981 · Mar 13, 2017

Robert Yanks said:
Hello RB,
Can you give some examples?

The standard deviation of all the 30 day lines(32 etfs) that I watch is currently at 14.6 and rising. The longterm average for this is around 8.

So there is a wide spread between top and bottom sectors.

MoneyMatthew · Mar 13, 2017

baggerlord said:
On a related note, CL has really gotten my interest the last few days. I'm seeing selling below the recent relevant POCs, at the right time of the month. This is what I meant earlier when I look for a trade with a good location in price and time. I don't track NLs for anything but gold yet because thats the only thing I actively trade right now due to work constraints. What are you guys seeing in CL numberline action lately?

I backtested Mav's personal bias towards OR%<30 & <20%. You will find that 84% of trend days (good A's) happen with an OR% less than 30. The only product exceptions were Meats & Grains (Lean Hogs to Wheat). But the odds were not much different. So if you are taking an AUP or ADOWN with an OR%>30 then good luck operating in the 16% space of luck. Assuming you daytrade.

Everything comes down to the NL's. Taking the 1 or 2 products with the highest absolute NL value keeps you in the right places. It all comes down to product selection. The NL appears to be the best way to get there.

If you backtest ACD without the total universe of ranked Number Lines then you are not backtesting correctly in my opinion. Again, just my $.02.

Robert Yanks · Mar 14, 2017

MoneyMatthew said:
I backtested Mav's personal bias towards OR%<30 & <20%. You will find that 84% of trend days (good A's) happen with an OR% less than 30. The only product exceptions were Meats & Grains (Lean Hogs to Wheat). But the odds were not much different. So if you are taking an AUP or ADOWN with an OR%>30 then good luck operating in the 16% space of luck. Assuming you daytrade.

Everything comes down to the NL's. Taking the 1 or 2 products with the highest absolute NL value keeps you in the right places. It all comes down to product selection. The NL appears to be the best way to get there.

If you backtest ACD without the total universe of ranked Number Lines then you are not backtesting correctly in my opinion. Again, just my $.02.

Hello MM,

When you are referencing "OR%" do you mean "ATR%"?

MoneyMatthew · Mar 14, 2017

No not really, maybe we are wording the same things differently but said a different way it is Opening Range% of total ATR raw value.

OR% is a percentage of ATR raw.
H=Your Opening Range High
L=Your Opening Range Low
OR%=((H-L) *100)/ATR

sleepy · Mar 14, 2017

MoneyMatthew said:
I backtested Mav's personal bias towards OR%<30 & <20%. You will find that 84% of trend days (good A's) happen with an OR% less than 30. The only product exceptions were Meats & Grains (Lean Hogs to Wheat). But the odds were not much different. So if you are taking an AUP or ADOWN with an OR%>30 then good luck operating in the 16% space of luck. Assuming you daytrade.

Could you please describe in a bit more detail how you did your backtest and how far back you went. Thanks.

baggerlord · Mar 14, 2017

MoneyMatthew said:
I backtested Mav's personal bias towards OR%<30 & <20%. You will find that 84% of trend days (good A's) happen with an OR% less than 30. The only product exceptions were Meats & Grains (Lean Hogs to Wheat). But the odds were not much different. So if you are taking an AUP or ADOWN with an OR%>30 then good luck operating in the 16% space of luck. Assuming you daytrade.

I can think of two reasons for this. One is that a smaller opening range is more likely to result in a trend day. The other possibility is that because the OR is smaller, a solid A is more likely to be made simply because the A level is closer. It is something I have performed some crude analysis on so far, and my initial results show that there is no correlation between OR size and price behavior that day. It is something I plan to look at much harder as my programming skills develop.

I personally see no difference between A levels plotted off an opening range, and A levels plotted off the opening price. At the end of the day they are just volatility levels as Mav has pointed out. I have noticed over the years that this thread has been running that everyone uses slightly different levels, which is fine. I personally started using a range rather than a price point several years ago. If nothing else I think for me personally it is a good reminder of the purpose of that particular tool. I think our brains tend to overestimate the importance of a single horizontal line on a chart.

MoneyMatthew · Mar 14, 2017

baggerlord said:
I can think of two reasons for this. One is that a smaller opening range is more likely to result in a trend day. The other possibility is that because the OR is smaller, a solid A is more likely to be made simply because the A level is closer. It is something I have performed some crude analysis on so far, and my initial results show that there is no correlation between OR size and price behavior that day. It is something I plan to look at much harder as my programming skills develop.

I personally see no difference between A levels plotted off an opening range, and A levels plotted off the opening price. At the end of the day they are just volatility levels as Mav has pointed out. I have noticed over the years that this thread has been running that everyone uses slightly different levels, which is fine. I personally started using a range rather than a price point several years ago. If nothing else I think for me personally it is a good reminder of the purpose of that particular tool. I think our brains tend to overestimate the importance of a single horizontal line on a chart.

I actually did a backtest that was more extensive than just "did it close above/below A levels". I actually coded the study to test for structural trend days. The distribution is significant.

If you are going to buy into the ACD Method then you have to buy into idea that the opening range is statistically significant. Otherwise, you are just slapping pretty lines around ATR levels.

I can prove to you that the first 5 minutes of the S&P Futures from the cash open have a higher High-Low distribution range than other times of the day (besides the cash close). That is not even up for debate. It is a classic example like that combined with the Number Lines that made me a believer. If you don't care about the opening range and just want to track vol and build levels around that then hell, look one day forward in Implied Vol in whatever you are trading, problem solved.

baggerlord · Mar 14, 2017

I agree 110% on the significance of the open range. It's the heart my trading and something my own analysis confirms. I am just not sure on the importance of the size of that range each day. I am learning a programming language so I can answer these questions. That's how important it is to me. I also haven't found any relationship between pivot range size and future volatility either. I intend to look at that a lot closer too. I just don't have the skills yet. But when I do I will post my results.