ugghh...i took a decent size loss yesterday (SL hit) on UJ after being up 100 pips...I don't even know what happened with yen yesterday. Mav, how do you feel about SL...do you use them?
All my stops are time based. In other words, there is a price level (usually an A level) and then a time component. Let me put this another way. In order for me to be stopped out, an opposing opposite trading signal has to be given. It can't simply be some arbitrary level because it hurts too much or some set number like 1% or 2%, etc. My stop on USD/JPY would be a monthly confirm on the A down around the 97 level. Note the word "confirm", not simply a penetration of that level.
Interesting explanation of how you manage risk in your positions. I have been been doing someting somewhat similar for day trades. When entering on a failed A up or down I set a very wide stop, maybe because it makes me feel better and a little safer, when in reality I exit only if the initial failure proceeds to make a legitimate confirmed signal against me. For the most part, I have been able to trade out of my losers pretty efficiently using this method. Mind you, I have not been doing this very long, and haven't got caught in a runaway move against me yet. I also think my moderate success has a lot to do with the fact that I don't just put on fades willy nilly. I wait for days with wide Pivot Ranges and Opening Ranges. I also use a very long opening range for Commodities, 30 minutes in CL, which is a lot longer than Fisher recommends, because I like to fade moves, that nugget came from you Maverick, so what can I say but thanks. I only enter my fades on strength, usually using a Stop Limit. It's not like I leave a Limit order at a level and simply hope. Yesterday in CL, I was 3-0 on these types of trades. In each case, Cl never traded below my Fade Level after initiating, I took a little heat once i put the trade on, but nothing major. It really is amazing to watch how well really simple Price Action techniques work well around well thought out ACD levels. One question though Maverick, I have been noticing that on a lot of Wide Opening/Pivot Range days, the market may not come close to touching a traditional A level, it is if the OR or PZ or Initial Balance or whatever you want to call it is just too "thick" to let price slip away form it by very far. I have been experimenting with using smaller A levels on these days, like 10 per cent of ATR instead of my usual 20. If ranges are wide enough, I have also used the top and bottoms of the ranges themselves, depending on price action, of course. The way I see it, there are no magical levels, unless of course your levels just happen to effect the trajectory of PA. Is this an example of making the method my own or am I straying too much and looking for an excuse to put something on?
Hi Maverick, Being new to this, I have not traded the method beyond the day time frame. Up early on a Saturday and bored so I thought I would slap some QTR and Monthly levels on the Euro and look for a trade. I long for the day when I have enough money and experience to put on stuf for big moves My numbers are going to suck because I am pretty much doing them with pen and paper, but here goes. Using the first week of September for OR of the 4th quarter: OR = 1.3103/1.3235. I don't have the capability to calculate ATR or Quarters, but from my own feel of VOL, it looks like we made a confirmed Quarterly A up in October. Obviously, the market has broken down in the last week, however we are still above the the QRTR OR, so in ACD land Still bullish for that time frame? I have my Monthly (November) OR at 1.3477/1.3588 with the A down around 1.3340. Again, thumbnail, but close enough. In the last two days we have trade through the A Down twice, and rallied above it into the close. The first attempt produced a candle with a very long wick, and it would seem there was some buying interest down in the 1.3340 area, again, but to a lesser extent on Friday. If this were the chart of day action, I would be looking to get long on a break above the previous days high, as long as the A Down doesnt confirm. Same type of analysis for swing, especially considering the Qrtrly bullish bias? Even with my very limited experience, I have seen way to many rapid moves to a failed A down, lead to Confirmed A ups that just run and run. Especially when the occur early in the time cycle, to get excited about shorting EUR/USD at these levels. Add the quarterly tailwind.... So in brief, long on a break of 1.3440, stop out when/if the A down at 1.3340 is confirmed. Targeting a move back toward the Quarter highs in the 1.38 range.
I think you have to do what feels comfortable for you. It might get away from the core principles of ACD but what you are doing might work better for you. Nothing wrong with making it your own.
OK, so I use OCT for the beginning of the QTR following the typical business calendar year. I had a perfect QTR failed A up to the tick in the Euro and guess where it traded down to? You don't have to guess, you know. It traded down to the QTR A down. Now on my numbers we have a confirmed monthly A down for Nov and a deteriorating number line. I have a -5 on the 30 and a -5 on the 5 day showing the negative downward momentum. At this point, I wouldn't touch the Euro. You had the sick move to the upside as well as that perfect fade at the QTR level. Don't keep going back for more. This is what most traders really struggle with. They keep going back to the well. When you get a great move in anything whether it's TSLA, Oil or the Euro, take the money, thank the market and move on. There are psychological reasons for this btw. Whenever you get a "clean" move in any product, all the traders who missed the move now take notice. Now that it's "obvious" to everyone, the "fools rush in". This makes the product sloppy and the noise level goes up considerably. Let's go back to my US Steel example. When I posted that trade, it was NOT obvious. The move off that level was as smooth as a baby's ass. Now, every Tom, Dick and Harry sees that X took off like a rocket ship. So some guys will try to fade it, some will try to buy new highs, some will try to buy pullbacks. But they all will TRY "something". I call that traffic or noise. X might keep going higher, but it's going to make a lot of noise doing so. The easy money was made "before" it was obvious. This is the part 99% of all traders simply don't get. You have to catch the move when no one is involved. This is why I often chide guys on ET who try to pick tops in the market. They are trying to short the market after it's gone up 30 days in a row which sounds completely logical right? The issue here is not whether the trade has value, but how much noise you have to deal with to capture that value. Noisy trades are VERY hard to execute. Think of it like trying to date a hot girl who "knows" she's hot. That relationship is going to be very messy. There might be perceived value there, but what are you going to give up to realize that value. A friend of mine once joked (correctly so) that you want to find a hot girl who doesn't know she is hot. LOL. Anyway I digress. The point is, there are two aspects to every trade. Discovering value and calculating what you are going to have to give up in order to capture that value. Finding the value is only one half the battle. Anybody can say short the market, it's overbought. But that is a lousy trade because the whole world is trying to execute that trade. Traffic!!!!! Write this down on a post it note and put it on your computer monitor: GET INVOLVED IN TRADES NO ONE ELSE IS INVOLVED IN. LOOK FOR VALUE WHERE OTHERS ARE NOT. BE FIRST TO THE TRADE.
Thanks Maverick. I am really trying to understand the greater strategic meanings of this method. I am getting tactics, but I know there has to be value in the grand design. It's funny that I used September as the start of the fourth quarter, which led to a horrendous ACD error, and I was an Econ major at a pretty decent school. Of course, I am so stubborn that I still think the Euro could get a decent bounce in here.
Try to refrain from "having your own" ideas. LOL. I know that sounds funny. But the problem is once you impose your "ideas" on top of ACD the trade becomes more about your idea and less then about ACD. Now don't get me wrong, you can have ideas and trade those ideas, just be careful with how they relate to ACD. Now I'm not saying you can't have ACD ideas. OK, this sounds confusing. What I'm trying to say is try to compartmentalize ACD from everything else. Because what will happen if you mix them up too much is you will begin to discount all the A values, all the number lines and replace them with hunches and feelings and emotions and what you want to happen and what should happen and heaven forbid conspiracy theories about your broker out to get you or Goldman trying to get you or the grand daddy of them all: "they". LOL. Regarding the Euro, if it gets back above the monthly A down then you can try to make the argument for a failed A down entry on the QTR. But.....again, here's the thing. This trade is going to be messy. There are going to be other pairs that people are NOT paying attention to that will be cleaner and have more follow through behind them. All things being equal, why not make things easier on yourself. Next point, another poster brought the triangular relationship between A, B and C. If A is stronger then B and B is stronger then C then A has to be stronger then C. We apply this to FX. So we have a confirmed number line on the Dollar right now. When you are buying the EUR/USD you are shorting the USD which has a confirmed strength. Now, if you want to buy the Euro, pick something "weaker" to sell it against. Remember, currencies are pair trades just like being long AAPL and short GOOG. You want to "spread" the Euro against a weaker product. OK, let's do some math and ACD analysis guys. I'll try to bring this home and complete the big picture. So let's make the Euro our constant variable and except it as a given that we be to be long the Euro based on some earlier pre-determined analysis. Now we have to solve for the weakest pair. I present to you the loony (EUR/CAD). The EUR/CAD just came off a very strong number and re-set but it did NOT make a monthly A down, in fact it just bounced off of it and it also did not make or even get to the QTR A down. But it had a nice retracement. Now, let's test my theory by comparing the loony to the dollar. Remember the relationship of A, B and C has to hold. When we pull up a chart of the USD/CAD we see that the dollar is indeed much stronger then the loony. Implying we would rather be short it vs the dollar. In fact, on my charts, the USD/CAD is attempting to confirm a QTR A up at 104.62. So this tells us using the Euro as our constant, the loony appears to be the better pair and therefore if I wanted to buy the Euro the optimal solution is to buy the EUR/CAD vs the EUR/USD all things being equal. So this is how I analyze things within the ACD framework. And btw, you can apply this approach across all products. This is how you take your ACD to the next level. Notice how I kept my thoughts, opinions and emotions out of it. Of course, you can use those as imputs I suppose for your numerator selection and use the quantitative approach for the denominator.
Nope. No longer live in the Chicago area. I did the meetings for 8 years so I think I covered just about everything.