Sentiment Divergence

There are several published indices that attempt to gauge the overall sentiment prevalent in a particular market. Typically, the higher the reading, the more bullish the underlying sentiment is. Even though it could never happen, at its extreme, a rating of 0 would indicate that everyone is bearish conversely a rating of 100 would indicate that everyone is bullish. For as long as I can remember, MJBF has subscribed to one such service, the daily sentiment index (DSI Index) for more information...

Index

('i' indicates an illustration 't' indicates a table) combined strategy, 58-59, 59i description of, 239 macro values, 84i-93i, 96i pivot first hour, 72 reference point trades, 30 rubber band trade, 28 time factor, 21i, 21-22, 23 A level, determination of, 15 A up calculating, 16, 20i, 20 combined strategy, 57-58, 58i description of, 239 macro values, 84i-93i, 96i pivot first hour, 72 reference point trades, 30 rubber band trade, 28 time factor, 21, 22-23 A values, description of, 239 ACD...

Rolling Pivot Range RPR

The rolling pivot range RPR , usually spanning three to six trading days, acts as a reference point for entering and exiting your trades. Perhaps the most important thing about the rolling pivot is not what it tells you to do, but what it prevents you from doing. Namely, it keeps you tied to your winning positions so that you don't get out too early because of some factor that has nothing to do with the market like a fight the night before with your spouse over your mother-in-law . Using the...

Traders Plan

In trading, as in life, you need a plan. This plan includes not only the micro a strategy for each and every trade you make but also the macro meaning why you trade, how you intend to reach that goal your means to the desired end , and what you'll do as an alternative if that doesn't work out. In my 20 years of trading, and nearly as many years teaching other people to trade, I've observed that very few people operate according to a plan. In the micro sense, too many traders are undisciplined...

Three Day Rolling Pivot

Another pivot concept that can be employed is the three-day rolling pivot, which may be used by those who take intermediate-term positions, spanning several days or even, with profitable trades, weeks. As the name suggests, this pivot is based up three consecutive trading days. To calculate it, use the highest high and the lowest low of the three-day trading period, and the settlement of the third trading day. These three reference numbers are then plugged into the Pivot Range Formula see...

Two Way 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 Fake Out

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...

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...

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...

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...

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...

System Failure 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...

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...

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

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

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...

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...

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

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...