I learned allot from Mark's books. I even went to a seminar he did shortly after his book came out and watched the video at least 5 times (which is quite a few hours) and took notes.
The big thing I learned from the book and mark's lectures was not the ACD method itself.
It was the notion that liquidity sqeezes are what drive short term profits.
this is true for both momentum trades and fade trades. Short term trading is not really about static chart patterns. It is about understanding the logic of how:
1.) The longer term, less price sensitive traders enter the market (relative to your own time frame)
2. How weak handed traders, on your time frame or above, tend to position themselves and manage positions.
The sophisticated traders on the time frame below you might on net be taking from you, which is why you in turn must Focus on the time frame above yourself.
If you understand the logic of these few things and really explore this concept, you start learning how to set up good trades that have very little intended risk. (I say intended because, of course you never really know till the trade is closed.)
When I look for trades or ideas to backtest these concepts are what are on the forefront of my mind. It is not about my personal opinion it is about how other traders are positioning themselves. Go for a quick ride or catch them when they are overextended. That is what I want to focus on and to me that is all short term trading is.
This is well put.
I used to trade prop years ago, and my entire focus was to identify when longer term, price sensitive traders entered the market. A big component of the routine was measuring the range (at that time the first 30 min) and responding to evidence of order handling on the tape as price approached boundaries and extensions of that range. Aside from the tape reading, that was mostly self-taught.
I since threw out any opening range analysis with the bathwater, when specialists started to become useless and tape reading, in that form, became pointless.
I only now use it as a small piece of my main method to identify the general chop of the day. Still can't do it systematically though -- it has to be discretionary, which I'm trying to get away from. What Fisher describes reminds me a little of what used to work for me years ago, and has inspired me to revisit that framework alongside what I'm currently doing.
Robert, do you use eSignal? (Or NinjaTrader, eventually trying to ditch eSignal, but that's way down the road)
Does anyone clear through fishers firm, MBF? I plan on going to NYC next month to meet with some people at the nymex about leasing a membership and also in search off a clearing firm, I was planning on contacting MBF. I know all you need to open an account with them is 100k plus data/cqg or tt...are all their traders (that don't do marks prop stuff) just remote, or do they have an office/trading room that all their guys trade from? I'll be contacting the firm, but I'm just curious if anyone has done business with them and has some feedback?
Hey jsmooth, did you ever end up going up to NY to talk to Mark?
I’m flipping thru EOD charts looking at the Sushi Roll and doing a little backtesting and I’d like your opinions on something.
I set up my scan and here’s what I noticed. In all cases today’s close is higher than the high of the previous 5 day rolling trading days, and in most cases today’s close is also higher than the current 5 day rolling trading days. But, sometimes today’s close is not the highest close of the current 5 day rolling trading days.
As an example, if you look at GE on 1/10/11 you can see that the close of 18.51 is higher than the 5 day rolling high from 12/28/10 to 1/3/11 (18.50) but in fact it’s not the highest close of the current 5 day rolling trading days from 1/4/11 to 1/10/11. Do you consider this a successful Sushi Roll? Or, do you want today’s close to also be the highest close of the current 5 day rolling trading days too?
Here are my notes from the 3rd tape of the NYMEX Symposium :
Trading is the hardest business in the world.
Not for the meek.
Tap into people’s emotions, people’s perceptions.
Get people caught so they want to run for the door.
The more the indicators line up, the more you want to step on the gas.
Jake Bernstein Sentiment indicator is what he uses.
Identify when people are caught, and beat them to the door.
The harder the trade is, the better the trade is.
How high is high-who the Hell knows?
How low is low-who the Hell knows?
The market Murphy’s Law: The market is there to screw the most amounts of people, to inflict the most amount of pain, to torture the most amounts of people, in the least amount of time. And it does exactly that.
Reversal pattern-He shows two down days in a row, lower highs and lows and closes and third days is a gap with the open higher than previous two closes: No one likes to buy gaps; If there is a gap, he wants to trade the higher gap because more people are hung or trapped.
The only thing he cares about is movement.
Outside reversals: H>H1 and L
Do you think that works (is there an edge here)? If everyone can see a chart pattern like an outside reversal day can it work? The answer is no.
What does work is outside 5 rolling days: Have 5 bars that are engulfed by the next 5 bars; He shows that last bar making an outside reversal up-that works. (38:25)
It works because people are hung and it’s not as easy to see as a one day outside day.
People make the same mistakes over and over-they don’t change.
What is slope? – Rate of change.
He thinks the slope of the moving averages measures the rate of change of the market’s perception of the market.
For moving averages he likes 14, 30 and 50. It’s his favorite in all time frames.
MAD move is a moving average divergence move. Moving averages are diverging. You get an extreme move and fade it.
First he looked to see if chart is going from neutral to all three ma’s rising together (market perceives a bullish attitude) then he will look at the number line to see if it’s up at +9 – buy it. If the number line goes back to zero they get out. Or, when the lines start to turn down get out.
Kindergarten trading: Watch the ma’s: If they are rising bullish; turning down then goes to neutral, then they can turn back up for bullish or turn completely down for bearish. It’s the perception of the market place.
Moving average fake out: Ma’s are rising and price drops below the 14 and reverses back up off the 30 and goes above the 14 look to buy at an A Up.
Regarding volume: He doesn’t follow it because volume is always hidden. Volume is not a good enough indicator to make a difference.
Trading is about finding people Achilles heel and knowing when they are weak and capitalizing on it.
Everybody has a weakness-marginalize your weakness-that’s the best you can do.
Minimize your risk by time, not by price. Time is a much more important stop.
Next he discussed rolling pivots: 3 day rolling pivots work better than a 2 or 4 day rolling pivot.
Everybody wants to predict when the market will be busy or slow (volatile or not).
They found “With the meat of the market concept” that when you have very narrow pivot ranges, the next day will often be volatile (have juice). That’s what you want if you’re a breakout or momentum trader.
Narrow pivots tend to predict volatile sessions.
In the markets they track, they look at the last nine trading days and ask “Is this the narrowest pivot of the last nine days?” If so, they want to trade it.
Also, if you have three consecutive smaller pivots, they like to trade it.
A trader’s best friend is volatility.
They go back and backtest like everyone else should be doing. After they know what works they backtest and look for optimal things.
He wants small opening ranges and small pivots with setups that make sense to create optimal risk to reward trades. If the trade isn’t there, don’t trade.
The best traders sit on their hands 80% of the time.