TwoWay Swing Area
The next concept is the two-way swing aiea. Let's say that on a chart you can see crude oil futures are rangebound between 24 and 25. The market just keeps bouncing like a pinball between the 24 area of support and the 25 area of resistance. Then some random event causes the market to gap down to, say, 23 below the prior low at 24. Now, let's say that, after some time, the market comes back and tests this 24 area. This prior low of 24 now acts as resistance. Furthermore, the 24 area becomes a...
Moving Average FakeOut
The second strategy using the pivot moving average is the moving average fake-out MAF . To illustrate, look at Figure 5.4, with all three pivot moving average lines sloping upward. The Data Natural gas January 2000 contract - from October 5,2000 until contract expiration December 27, 2000 Data Natural gas January 2000 contract - from October 5,2000 until contract expiration December 27, 2000 daily bars of the chart show that the market initially climbs steadily above the 50-, 30-, and 14-day...
Sushi Roll
Despite the name Sushi Roll this indicator has nothing to do with Japan, raw fish, or anything else connected with sushi. But it so happens that when we were first discussing this indicator we were at a Japanese restaurant and someone order sushi. One thing led to another, and that's how this particular early warning indicator of a change in market direction got the name sushi roll. Now, here's what this early warning indicator does. First of all, everyone knows what the textbook definition of...
Point As and Pivot Ranges
The first combo strategy I will discuss is a Point A through the pivot. To recap, a Point A is made when the market trades to a specific level above the opening range Point A up or below the opening range Point A down . But what happens if that Point A target is near or within the pivot range With two indicators coinciding at a particular price level, it emphasizes the importance of this reference level. And, when the market trades at and through that reference area, the signal is twice as...
A Up 1
t gt - ci- lt - cy V- lt y lt y lt y y lt y lt y 9 ' lt lt lt lt gt g V F - - Figure 4.1 July natural gas June 12, 2001. The market made an A DOWN on the 2nd 20-minute bar of the day, from that point until the close the market never traded above the opening range, and it closed below the opening range, giving this day a Number Line Value - 2 lAVa ue.25 ticks- A Down 7415 10 25 Opening Range 7440-7580 9 50-10 10 Close 7065 3 10
T
9 45-9 50 9 50-9 55 9 55-10 00 10 00-10 05 Figure 3.4 Failed A up against the pivot. with a failure within the pivot range increase the likelihood of the market reversing to the downside. The possibility appears very slim that the market would turn around at this point and make it through the pivot range. Just in case, however, you'd have a stop at 20.26, one tick above the pivot range. A failed A up just above or within the pivot range confirms resistance in that area, and it increases the...
Point C
Once an A has been made, the next probable entry point in the ACD system is Point C. Point Cs are calculated just like As based upon a certain number of ticks above or below the opening range. In the example of crude oil, As are 7 to 8 ticks above or below the market. Point Cs in crude oil are 11 to 13 ticks above or below the market. A reference list of our current values to calculate Point Cs on various stocks and commodities also can be found in the Appendix. As you'll see, for commodities...
The Pivot Concept
As a trader, you look to identify key areas at which the market is likely to find support or meet resistance. You know that if the market finds support at a level, it's likely to bounce and trade higher, or if it meets resistance at another level it will reverse and trade lower. You could also surmise that, if the market had enough force to break through that support level or penetrate that resistance, it would likely make a significant move in that direction. You now understand the importance...
A Down
I I 11 M l M I 11 I i I i It I I 11 11 Il11 I I 111 11 lM I l l 11 l i ll I l 11 11 11 l l ilil 11 l I amp v y V gt gt -N y gt y P g lt o lt c M amp amp amp 0 gt P 0 P P Oj- O gt Jj ft gt .cr gt ib gt s' V N' CV lt V CW lt V oy gt S' y amp y nV the market would have established an A down. At this point, you would establish a short position bias below 25.53 to 25.52. A points up or down are based upon a certain number of ticks above or below the opening range, if trading is sustained at these...
Info Ich
Points A and C in Chapter 1 helped you to determine stop placement, so does the pivot range. In this example with a long position bias initiated above the pivot range, your stop would be the other side of the pivot range, at which your bias would shift to neutral. Now, let's change the scenario. In Figure 2.2, you can see that Stock X has a daily pivot range of 35.00 to 35.20, and as in the previous example it closed at 35.40. It opens the next day at 35.35 and it trades lower. In this...
Significant Time Frames
As you have learned thus far, much of the ACD system is based upon the premise that certain time frames whether it's an opening range or a pivot range are significant in helping you to establish a bullish or bearish position bias. There are other significant time frames, particularly for a longer-term perspective Figure 2.8 First trading day of the month. Figure 2.8 First trading day of the month. that can be used to gauge your bias. Among them is the first trading day of the month, which is...
SystemFailure Trade
This brings us to the next trading topic,, the system-failure trade. This trade should be made when markets are nonvolatile and choppy. For example, trading stocks from January 2001 through July 2001 provided an excellent opportunity to employ this strategy. What you'll observe happening in these choppy market conditions is that, while the good Point As and Point Cs are being made, the market then reverses and you're stopped out of these trades. Thus, when the market is choppy meaning erratic...
Trend Reversal Trade
Traders love to pick tops and bottoms. It's something I don't really like because it's nearly impossible to do. But if you're going to try to identify market extremes, the best way to do this, in my opinion, is with the trend reversal trade TRT . Basically, when the TRT setup occurs it is a possible signal of a short-term and even long-term change in direction of the market. For a trend reversal trade setup, the first requirement is a market that has been in a significant uptrend or downtrend...
Info Jkp
Figure 5.2 Pivot moving averages change in slope. the seventh trading day the pivot is 34.30, which makes the three-day pivot moving average 34.35, and on the eighth trading day the pivot is 34.25, making the three-day pivot moving average 34.30. Plotting these moving average numbers on a graph yields an entirely different line see Figure 5.2 . Clearly, the line curves and begins to slope downward. What this shows you is that there has been a change in market perception. The pivot moving...
Info Riz
9 40-9 50 9.50-10 00 10 00-10 10 10 10-10 20 Figure 3.1 Good A up through the pivot. size. At the same time, using ACD and the pivot range together, you would use a narrower stop than with the ACD alone. As mentioned in Chapter 1, the stop for an A up is Point B, which is just below the bottom of the opening range. In this example, that would be below 27.80, which is 15 ticks below your entry point. However, going long with an A up through the pivot, your stop would be just below the bottom of...
Moving Average Divergence Trades
A lot of traders like to fade the market, meaning they pick a top to sell against or they pick a bottom at which to buy. A better strategy, however, would be to identify moving average divergence MAD patterns to help you to spot opportunities to fade a particular move. The most important setup for the moving average divergence trade is that the three pivot moving average lines must be either neutral flat, no slope or confused with one sloping upward, one downward, and one flat . In fact, it's...
KNOW YOUR ACDs
When you go in for your annual physical, the doctor takes your blood pressure, listens to your heart and lungs, draws some blood, etc. Based on all these indicators, the doctor makes a determination about how healthy you are. Now, assume that the patient drops dead right there on the examination table. The patient has no pulse Then it doesn't matter what the cholesterol level was, right No pulse no life. I use this analogy to explain the ACD methodology. In trading, you'll be looking at a...
Putting It Together
As you can see, once you understand the premise behind each of the indicators in the ACD system the Points A and C, the pivot ranges, the pivot first hour high low, and so forth you can check the market's activity against this criteria. The market either matches up with the scenarios, or it doesn't. If certain events occur for example, if the market makes an A up through the pivot or if it meets the criteria for a pivot first hour high low then you can draw certain conclusions and trade...
The Advanced Trader
Many traders have good entry points. But when it comes to profitably exiting a position, that's where they run into trouble. Most traders do not have a consistent exit strategy that allows them to close out profitable positions before they turn into losers. The ACD system not only alerts traders to good entry levels, but it also gives them early warning indicators about when to get out. Furthermore, using these ACD strategies allows a trader to use straight analytics and eliminate the emotional...
Info Xbw
Figure 5.2 Pivot moving averages change in slope. time frames, rather than using only one moving average that is representative of just one time frame and one opinion. As in the earlier example, what you are looking for is the slope of these lines upward, downward, or sideways with no slope at all. Remember, slope measures the rate of change the steeper the slope, the faster the rate of change. In the case of the slope of the pivot moving average, what you are gauging is the rate of change of...
A Down Uqu
j gt - gt - s- amp y- amp amp - 9T fir fir lt 0 JY lt cr fir ry k k' k,- ft.' lt V lt V 3' lt V lt V ' rk' ri. V k - . - J n - rtkv Once you have assessed the values for several trading days in a row, you can begin a number line that reflects the activity of the past 30 trading days. Remember, the time frame is 30 trading days not calendar days with holidays and weekends excluded. And even if the market is open for only a half day, such as before a major holiday, that's still considered a...
Trading the Number Line with MAD
The pivot moving average lines provide you with yet another point of reference for making a trade. This concept does not replace the micro ACD or the number line. Rather, used in conjunction with these other indicators, you provide yourself with a better, more complete trade setup. For example, let's say the 30-day macro ACD number line is at 7. The pivot moving average lines are sloped upward, although the market has dipped below the 14-day line. Now today the market trades higher, above the...
Putting It Together Acd And Pivot Ranges
At this point, you've learned the basics of the ACD system, using Point As and Cs as reference points for a short or long position bias. In Chapter 2, you reviewed how pivot ranges define key support and resistance levels and also can be used for trade entry points. Now, we're going to put the two strategies together, using both the ACD reference points and pivot range to fine-tune your trade entry points and stop placement. By combining the two strategies, you will have a higher probability of...
Logical Trader Midterm
In the past four chapters, you've learned some key concepts in the ACD system including defining Point As and Point Cs, calculating pivots and pivot ranges, assigning a value to the market, and using the macro ACD number line. Now it's time for the review. This midterm is designed not only to assess what you've learned thus far and don't worry, you're the only one who will know your score but to reinforce the concepts discussed in the first four chapters. Write the answers to the following...
Info Xbr
which shows the settlement price and the daily value for each day. As you look at the chart, you'll see that on January 16, the cumulative, 30-trading-day sum reached 9 for the first time. This would have been the initial tip-off of an upward trend developing. But before you could be sure of that, the market would have to prove itself by sustaining at least a 9 level the next day. January 17, the day being eliminated from the 30-trading-day sum, had a value of 1. That would bring the...
The Opening Range
ACD starts with the concept of the opening range. The opening range is the initial time frame of trading for a stock, commodity, currency, bond, or other financial derivatives at the start of each new trading session. For stocks, the opening range time frame is generally the first 20 minutes of the day, meaning if Stock X trades from 30.00 to 30.75 in the first 20 minutes of the day, that is the opening range to be used in the ACD system for that particular day. However, if a stock has a...
Mini
1 H-l-fll 1 M 1 1 1 1 1 1 1 1 1 1 1 1 II 1 1 1 1 1 1 II 1 1 1 1 1 Based on this opening range, the A point to enter a long or short position is plotted above or below the opening range, based on set variables. These variables are based on our own proprietary research, the process of which I won't share with you except to say that the ACD values are based on the volatility measurements of a particular stock, commodity, or financial derivative. Please see the table in the Appendix that gives the...
Macro Acd
In Chapter 1 we discussed the concept of micro ACD, namely, how to plot Point As and Point Cs based on the opening range of a given day But what does a good A up or a Point C down mean in a larger context We know that in the microview, an A down is where you'd have a short position bias and an A up is where you'd have a long position bias. After the trading day is done, however, what do all those Point As and Cs mean That's the macro ACD concept. Simply put, macro ACD looks at 30 trading days...
Pivot First Hour HighLow
The last pivot we're going to discuss in this chapter is a short-term trading concept called the pivot first hour highs and lows. When it comes to trading, the one thing that everybody wants to know is when there is going to be a trend day, steadily in one direction or the other. For short-term trading only, the first hour highs and lows give you an early indication of trending days. For this to happen, several criteria must be met, regarding the Point As and the daily pivot range, which of...