Long time lurker on the ACD main thread, thought I would register at ET and ask a couple of general questions. I have been studying ACD for awhile and understand what Maverick means about "making the method your own". Different OR's and levels to best suit your style. While playing around with the system I noticed that days with wide OR's and PZ's don't bode well for the straight breakout trades. Is this maybe because the stop levels are quite large, and the RR gets skewed, or do these conditions have predictive value? I use an OR of x minutes, and A's of Y% of ATR. On days when my OR is greater than say 3o% of the ATR, I do better by setting my A's even wider and only taking fade signals. I am also more inclined to take this route when the previous day's action was very trendy or exhibited an abnormally large Range. Does this make sense, or am I falling victim to recentcy?
I use to have a ratio that automatically calculated the size of the OR divided into the ATR and if that ratio was greater then 30% I think, I avoided breakout trades. Then on the extremes, if say the ratio was greater then 50% then I actively looked for fades and with size. And if the ratio was under 20% then I actively pursued breakouts and with size. So there was a lot of conditionality. For the record, I don't do this currently, but that is how I used that data. And your theories are correct.
Thanks for the reply Maverick. Being told that I am at least kind of the right track, by the ACD Master, supplies a nice shot of confidence. By the way, could the failed A against the pivot signal be the holy grail that everyone says doesn't exist? The Set up that makes such fundamental market sense that even the HFT's can't beat it? I feel like a little kid having to mention it online, but wow, it's awfully good. I wish I had enough computer power and know how to test it against a basket of futures products. Could ONLY trading this signal across a variety of markets be the cornerstone of a profitable method?
No, like everything else in life, it has it's usefulness when appropriate. Failed A trades can get very messy. But there is a market environment where they will work consistently well. And others where they will chop you to pieces. Same with pivots. The important thing to understand is that ACD is giving you a picture just like any other technical forecast. A good trader will understand that picture better then one that is not as good. Once you develop ma good feel for the market it will be very logical when to use certain things and when not to. It just comes from a lot of screen time. I wish I could tell you there was a short cut but there really isn't.