I'm doing something very similar. I use daily, weekly, monthly and quarterly levels and they all interact with each other. Once you understand the dynamics of volatility in different time frames, your mind starts opening up to all the different possibilities.
today was a perfect example of opening range breakdown you were either short biased or got your ass stopped out. Not cherry picking but this is the kind of trend you want to ride to make up for the chop. spy ten minute
Question for ACD folks: Can one use the ACD methodology using strictly end of day data? TIA for your input.
Great thread by the way, I've read it through numerous times and gotten some great info. My question relates to OR, I used it a couple years ago when I traded Naz stocks in University and it was pretty cut and dry with market open/close times to determine a timeframe that works well for you. I've been trading Nat-Gas Cash markets now for a couple of years and been pretty successful at optimizing day gas (for an energy marketer). lately I've been branching out into buying/selling ICE basis and using bank swaps to optimize calendar spreads as they generally have better spread cash flows. I was wondering how hard and set the rules need to be for OR? If I can pick up a directional bias on any given day, I can manage my book more efficiently by buying early or waiting until later in the day if I can anticipate a sell-off. A lot of the time, there is huge volume before before pit open with significant moves but other times nothing before open outcry. Is it detrimental to the system to change OR timeframes? I'm sure consistency is important but if I see large action pre-pit, I tend to mold my OR around that action vs using a hard and fast time frame. Again, this is subjective and I base it on what I see on T&S and my charts. I've only started experimenting with these variables so if I need to make a correction, or all those out there who are very knowledgeable with the system see a flaw I would appreciate any feedback. Thx!
The idea for the OR is to pick a time period that has some significance to it. You also want to be consistent. A lot of the price action that you see from the ACD levels comes from understanding how any given market "should" be behaving under normal circumstances. So if you keep changing the OR time period around it may affect the way you interpret that price action. BTW, there is nothing stopping you from using multiple OR's throughout the day or week.
Thanks Mav, I always use a consistent length of time just at different periods if the action is there. When I used the pit open exclusively as the start of my OR, my results were not as good as when I began incorporating big pre-open movements. I really like the idea of using multiple OR's during the day and will start working this into my system. Cheers JO
I'm trying to understand how to use this concept on breaking news plays and would really appreciate any feedback. I'm using UNH today as there was news midday that caused great volatility in the stock.I understand that ACD works really well with understanding the volatility plays to set the opening range. So my first question is with this, when do you actually set the range? When it was trading 42.50 took size on the offer quickly showing its strength, and 45 rejected it cleanly. Would you use these levels as an opening range for this type of play? Or use that swing low below 42.50 as the opening range bottom (I know it probably doesn't matter) I'm just trying to understand on breaking news plays, how you actually get the range. Secondly, is the A value the same as it would be for a normal open? Or is it different since its breaking news? I currently use about 20% of the average daily range. Thirdly, once it holds about the A value (if I'm using the correct number), how long on breaking news plays? I was using about 2.5mins but also saw that once it was above 43.16 it held for volume so I figured time wasn't as important as it was strong above that level. Finally, if we would have dropped to the C down, what would your play have been besides thinking short? Would you carry it overnight as its a late day C down? Thanks again for helping me with this. I am a firm believe in using ACD to get a bias, just need some clarification from someone more experienced in using it. Side note: Would today 02/03/2011 be considered a late day C up in the ES? KD
Again, my answer is going to seem vague but I can't stress enough how one has to make ACD their own by making it compatible with trades you feel comfortable making. Are you a momentum trader or a fader? Are you only an intra-day trader or do you hold overnight? Do you like to scalp or hold on for the bigger moves? See all this will depend on how you set your ACD parameters. On my intra-day ACD that day, the stock first made an A down and then on the news confirmed a C up. It made a weekly A up even before the daily C up which is a great long setup. Now another thing you could do is use your normal intra-day settings then when news comes out slap on another OR around the news event and see if the ACD news levels coordinate well with the normal intra-day setup. In other words, maybe the news A up is the same area as the intra-day A up. Or, maybe you get an A up on the normal ACD levels and you are able to buy that wick on the failed A down on the news ACD level. Use your creativity here! There are a million ways to use this but it will be for naught if you it's not compatible with how you like to trade. At the end of the day, all technical systems are about two things and two things only. Getting you to pull the trigger to get in a trade and getting you to get out when you are wrong. If your levels and parameters serve that function, then you my friend are shooting well over par.