Hi Quon, Thanks for your prompt reply I understand there's no wrong way but I want to identify the general approach that people have been using to figure out why the A level is calculated the way it is. From the sounds of it, I am still evaluating the daily period (even though I am looking at the intraday movement) then I should really look at the average daily volatility of the past 5-30 days to identify how much movement can happen that current day. The ACD levels as suggested by some users could be 20-25% of the average daily volatility to identify the significant levels where bullish/bearish bias is established. Again the % of the ATR used can be dependent on how big the opening range I decide to use, which is also dependent on what I determine to be appropriate for the security I am trading. The style / framework factor also comes into play. Thanks, Felix
OK, so a good old friend of mine from the P&R forums decided to come up here and give me some criticism of my method or perhaps my application of this method. He sent this to me over PM. I won't name the poster as it's irrelevant. However, I do wish to post his comment and address on here as there has been very little commotion on this thread (which has been good). For the record, I love criticism and actually don't mind people posting some on this forum. I'm not sure how sincere this poster really was, but I'll address it none the less. His comments: "Bottom line: You either follow a method or you don't. You either take a confirmed signal or you don't. If you trade the ACD method, or any other for that matter, then you take its confirmed setups. Period. Everything else is only so much fluff & fold, including what your CTA friend does. If you hold this ACD method in such high regard, would you not have taken a confirmed setup irrespective of sentiment et al? May I recommend Occam's Barber Shop for a really close shave?" OK, so let's get right to it. I know the phrase price action can be very ambiguous to many on here. So let me try to define what I mean by the word price action and point out that the ACD methodology IS a price action based system. It is NOT a rules based system. A rules based system usually follows a logic of "if/then instructions. If this happens, then do that. It's very static and rigid and quite frankly, rules based systems work much better in predictable environments, certainly not the financial markets. Price action is about making decisions based on the interpretation of several variables. It usually leans on the trader's past history, experience, knowledge and ability to recognize nuance and subtlety. The purpose of using price action over a rules based system is to spot and locate opportunities in the market that are NOT obvious to everyone else. Static systems are the opposite. Because static systems regurgitate the same variables over and over again in the same rigid manner, they can easily be spotted and acted upon by anyone that pays attention to it. And believe me they will if those static patterns happen to be working. The reason why ACD cannot be a rigid rules based system is because there would have to be an assumption that the input variables are absolutely correct, which we have no idea that they are. Those input variables are the ATR length, the width of the opening range and the A variable. Since these are just "approximations" we cannot take them as absolutes. So since we know there is some wiggle room in these input variables, we have to accept the fact that they are not always going to be precise and we must use them in a way that gives us some allowance for deviations. By utilizing a price action approach where we are watching several markets and using all the data available to us, we can actually get a much clearer picture of what is happening. I have often described ACD as lens in which we view the market. We still have to trade and make decisions, but ACD makes those decisions more clear and precise. His comment about confirmed set ups. There are NO confirmed setups in ACD. Again, the whole word confirmed brings us back to the rigid world of rules based trading. That simply does not work for me. When I use the word confirmation as it pertains to an A level, that simply means it has confirmed in "time". It does not mean close your eyes and take the trade. There are many reasons why I would NOT trade a confirmation on any time frame and I've gone over that in detail and have given specific examples. Let me say this again, the best trades one finds in the market are usually the ones nobody else sees. ACD gives you the lens to find those trades. The whole world can identify a trend. The whole world can spot new highs and new lows and which products are breaking XYZ moving avg or taking out some critical support or resistance levels. I don't take trades that the whole world is running into. Not because they are not going to work, often times they do. But they will be messy. Stops going off all over the place. I prefer the trades no one is watching or levels that no one is paying attention to. Even better if most people are on the other side of the trade. To sum up, trading is not easy. Very few people will ever succeed at this. ACD will not make a bad trader into a good one. It will only make a good trader better. There are no magic levels. There are no magical setups. Trading is going to require you to go against the best people in the world and beat them day in and day out every single day. It's going to require more then rules to succeed. It's going to require more then just a "system". I also want to point out there are a millions ways to use ACD and the way I use it is not the "right" way. It's simply MY way. Hopefully I have addressed this PM in full. I always welcome comments and feedback. Both good and bad. It's possible the other poster simply doesn't like me and wanted to mouth off. Fair enough. But in case his comments were sincere, my above post should be an adequate response.
So after this long detailed explanation, the poster who PMed me still thinks all I did on the bond trade was get long a confirmed breakout. For the record, the bond trade was NOT a breakout trade and I went through the logic in my previous posts. Anyone that pulls up a bond chart can clearly see that the price level where the monthly A up was in July was not a breakout and was in fact in the middle of the trading range of the previous month. That was my whole point! What I've learned about ET over the years here is it doesn't matter how many times you say something or how well you explain it, people will believe what they want to believe.
The most vocal are those who have a vested interest in disagreeing, but they're not everyone. There's something to be said about cognitive dissonance and the people who talk a lot on ET.
This is well put. In my experience, the loudest folks are typically the ones who are getting their hats handed to them, and feel the need to "hate" if you will. Maverick, I think I speak for many of us when I say how grateful we are that you share so much of your hard work here at ET. I think for most people it's just impossible to believe that any level of interpretation could color a richer understanding of ACD. Hell, just last week I was on vacation 6 hours behind est, (the wife forces me to leave a convenient time zone so I don't trade-and I completely agree) and I spotted a move that was the near polar opposite of the monthly. No signal told me to get short, but I did, and it ended up being the best trade of the month! ACD is a framework though which you have an opportunity to trade, but you have to know how to trade. Would you build a house knowing only how to swing a hammer? Nope.
I concur with others' sentiment on the value of this thread. I've been lurking around ET for awhile, and I gotta say this is one of the most informative and reasoned threads I've read. Much food for thought here. Thanks a ton for your insight and detailed explanations Maverick.
it's the only reason I don't have this fool on ignore. He is a trader, so I put up with his ass. jk, Mav, jk
One more thing, everyone cannot read price action in any form. They are simply not wired to do it. So one of your fellow righters cannot trade. Help him in fight club, but he has all the info upstairs to help him. He is on his own.
Great. Someone left the back door open and some of those rodents from P&R are sneaking in. Just kidding RCG. You are always welcome. You have no idea how flattered I am that you a"putting up" with me.
You're welcome. I have to say, I'm very pleasantly surprised that this thread has not been infested with trolls yet. Usually they look for high quality threads where everyone is getting along so they can piss all over it. Knock on wood....hope they stay away.