You can get very creative with ACD. You might also look for big volume days, news event days, gap days, etc. All those days can be used for OR. As I've said before, you will find your trading improve greatly when looking for things that don't happen often. Look for the rare trades. The trades no one is talking about. Look for things that don't make sense.
This is something I was thinking about, and would like feedback on from anyone in the thread. I guess it is a 2 part question. 1) Is anyone using more of a "macro setup" like a daily chart technical formation pattern as a point of interest when looking for candidates? (an example would be a wedge forming or major S/R level) 2) With regards to "high volatility", can anyone define what they use as criteria for this? What I mean is this: A stock can be volatile (large % atr's intraday) on a regular basis. In other words, its normal to have decent swings, but not unusual. In other words, its normal to have large intraday swings. -or- A stock can be "recently and unusually" volatile in the last week or so (news, etc) but normally average. So I guess my question has to do with how people defiine volatility, and is one of my criteria more applicable to this situation. I ask b/c with situation #1, you will have naturally larger ATR levels, even if a tighter % is found to get your A's... With situation #2, your "normal" ATR will be alot less (due to normal conditions) but since the stock NOW RECENTLY) is whipping around, it might work better. or am I just overthinking this thing, and barking up the wrong tree?I am asking this b/c I trade equities, etc.
I think you may be over thinking things too much. Keep things simple. Ask yourself some basic questions: 1) Does the product look strong or weak? 2) Is there anything unusual about the behavior of the product right now? 3) Is this product being heavily watched at the moment? I actually don't like when a product becomes more volatile the normal because more often then not, that means the move is just about over. Volatility is nature's way of bring back normalcy to a product. You want to get in the product before it becomes overly volatile. Also, just a general recommendation. Please don't add too many other indicators to whatever you are doing. I've never met a profitable trader that uses too many indicators and needs so many confirming indicators. What makes price action is effective is that it's simple. Indicators kill price action because it destroys the purity of it.
Just adding my two cents, (for what it's worth). I think it's important that you find something that's confirmed an A on a longer term time frame, and yet not become overly volatile just yet. A's tend to occur before the product really explodes to the upside, (look at Maverick's calls on Gold, Coffee, and ESPECIALLY the 30yr) and just because something confirms say a monthly A, doesn't mean it can't pull back too, (this is important). Sometimes you're in the trade while it's making an A. If so, great, but sometimes you're not. No worries there, keep watching, and play a favorable bounce. Remember what Fisher says about confirmed A's - they can pull all the way back to the bottom of your OR without being "broken."
Not sure if I posted this before. In case anyone is interested: http://www.futuresmag.com/Issues/20...her-A-trader-returns-to-his-roots.aspx?page=1
Thanks Maverick, Great article. I've seen his trading seminar videos, (try to catch him on Fast/Sqwak/Strategy Session as much as possible) and have been well aware of his affinity for nat gas, but he makes some very good points here and kind of ties his thesis up with a bow. Favorite piece, "As these paper currencies continue to get debased in a revolving currency devaluation, crude oil is going to keep increasing in value along with gold and all the other metals." Again, thanks as always Maverick. Much appreciated.
I am a bit confused. Are you saying those are desireable traits? If so, I thought earlier you said that when everyone is watching/trading the same thing, its not a good quality. But isnt that what brings volatility? Sorry, I am kinda confused on the point you are trying to make. I guess, (and perhaps I am wrong) since volatility moves in cycles, I was thinking find something that has recently been volatile, (or has the habit of expanding and contracting rather frequently), wait for it to settle, than anticpate the next move or failure... Absolutely. I learned this awhile ago. In fact, I skipped the section on moving averages in the book.
Volatility usually means the trade is becoming crowded, over leveraged and the price action is driven by stops. It's very hard to make money in those markets. Usually "daytraders" want volatility because they have a fixed amount of time to exit a position. A swing trader does not. A swing trader wants trend, not volatility. Of course all traders want movement, but not erratic movement. It's very hard to enter a swing trade with a stop if there are stops all around you and people jumping in and out with massive leverage. I much rather have a quiet market that is being slowly accumulated that is trending. One of the mistakes a lot of newbies make is looking for volatility. It causes them to get into stocks or commodities "after" they have made big moves and now the product is whipping back and forth stopping everyone out. It causes them to over trade and also to build bad habits i.e taking profits too quickly. Once you see an explosive move in volatility, usually it's best to look for trades elsewhere. Not wait for them to calm down and get in them. The volatility usually represents the culmination of a move. I remember back when I daytraded in NY for Worldco as a newbie, I would run scans everyday for volatile stocks, because that is where I thought the "action" was. Then one day a guy came up to me and said why are you watching those stocks, the move already happened. Watch these. I said, those stocks look dead, why would I trade them. And his response was, because they are going to move. I asked him, how did he know that? He said, it takes practice, but that is the skill you need to develop. It's not easy, but who said trading was.