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I dont use tape or DOM in the traditional sense but I try to get a sense of when the orders are getting absorbed more and getting "collected" more than they are pushing price. In other words, I am looking at one form of the cumulative delta or …
In order to be fully committed to ACD methodology, I changed my username and the name of the thread accordingly. Thanks Big Mike.
Going forward this journal is about trading the ACD method modified with a lot of help from @mfbreakout, @BTR411 and @Balanar. I appreciate every bit of help I have received from them. I am also grateful to @TradeFlightPlan for his generosity.
The past 2 and a half weeks were spent solidifying the trading plan. I am amazed at the potential of Mark Fisher's ACD. No need to get into the details but I have enough of ACD programmed to help with day trading CL.
This journal is what it is to hold me accountable for my trades going forward. For that same reason, I am including my trading plan below. The plan is not black and white. It is not an if this.. then that kind of a plan. It is a discretionary plan. Something that I have always been afraid of but I am well prepared this time.
I am going to be fully realistic about my trading plan. I do not expect to start hitting home runs. I do expect to hit singles and doubles with the occasional home run and avoid being struck out as much as possible. This is an evolving plan that will mature as the days go by. It is not my full plan but it is enough to keep me honest in a public forum.
Concise Trading Plan
Guiding Principles
I fully embrace the fact that losing is part of trading and that there will be losses no matter what.
I fully accept the fact that the market is in control and that I can only control when I get in and get out of a trade.
I fully accept my trading to be completely free of ego and completely full of conviction.
I will have no bias strong enough to accept that a trade has been proven wrong or even to reverse trade direction
Context Context or big picture or bias is required before a trade can be put on. This is what defines the why.
Context will be defined based on the following:
Context areas:
First day of the month defines the monthly pivot range for the rest of the month
First asian session of the week defines the weekly open range for the rest of the week
45 minutes of the Euro session starting 1:30 AM central defines the Euro open range
45 minutes of the US session starting at 7:30 AM central defines the US open range except inventories day
Daily 6:30 PM to 1:00 AM central defines the asian session range
Daily 2:00 AM to 7:00 AM central defines the Euro session range
Daily 8:15 AM to 4:15 PM central defines the US session range
RTH Range with exchange close defines the daily pivot range for the next day
3 day ETH range with exchange close defines the 3 day pivot range for the next day
ETH session range defines the Previous Day high/low for next day
Exchange close defines the Previous day close for the next day
Other factors affecting context are as follows:
Average Daily Range
Current Daily Range
Time of the day
Results of current day trading
The lists above cover most of the factors that will be considered for defining context.
My trading day begins at 7 AM at which point in time the following context areas are available:
Weekly open range
Daily pivot range
3 day pivot range
Asian session range
Euro open range
Euro session range
Previous day high, low, close
These areas will be examined with relation to current price and price action so far since ETH start to determine immediate context and potential trade locations.
Bullish bias is determined if price is above daily pivot range, 3 day pivot range.
Bearish bias is determined if price is below these 2 ranges
Price in relation to Euro A' and C' targets determines further bias
Price in relation to Weekly OR determines further bias
Most of the days, it is anticipated that there will be a high probability trade setup between 7 AM and pit open.
US OR formation completes at 8:15 AM with the exception of CL inventories day when it is 15 minutes after the report. At this time, in addition to the already established areas, the US OR is available to develop further context. ACD principles governing US OR will be taken into consideration from this point forward along with the already established context.
The following will be continuously monitored throughout the trading session:
Average Daily Range
Current Daily Range
Time of the day
Results of current day trading
As the current day range approaches the average daily range, probability of an existing move to continue further diminishes.
The later on it is during the day, the lower the probability of large moves is
There are no set rules based on current days trading results so this is currently left up to discretion
...to be updated further
Entries
Context will help identify 2 categories of trades - scalps and trends. While the major focus will be on trend entries, scalps may be attempted when a trading range (box) is established that is large enough.
Once context is determined, order flow will be used to find an optimal trade entry price.
2 home grown order flow algorithms will be employed for both types of trades:
One is based on temporary order flow imbalance when order absorption is evidenced
The other on order flow divergence when higher highs/lower lows are made on lesser order flow evidence
The existence of either one of these is enough to confirm trade entry.
Requirements for trend trades
Entry will always be taken with a stop market order when the market starts moving in the direction of the trade.
Entry will be taken such that the stop is below the most recent swing point by several ticks
Entry will be taken such that there is a high probability of the target to be at a location that allows for a minimum of 1:2 risk to reward ratio
These requirements will be slightly relaxed for scalp trades but points 2 and 3 will be adhered to as much as possible
Trade Management
This area is open to a lot of improvement since it is difficult to formalize rules without taking several trades but at least the following will be adhered to:
Once minimum R:R has been achieved, order flow will guide the exit as much as possible along with context areas
Stop loss order will not be moved at all for trend trades
Stop loss order will be moved to protect scalp trades as much as possible without suffocating the trade
... In progress, to be completed during the weekend.
State of the mind, psychological guidelines:
I intend to read these each day until the time I do not have to. This is like the stress-free me talking to the stressful me.
When not in a trade:
There is no rush to get into a trade. "Its not going to run away". There is always a next opportunity. This is not a sprint, its a marathon. Pace yourself.
Focus always on initiating a trade when there is context and confirmation. First context, then confirmation. Past habits will crop up but always suppress them, focus only on these 2 things. No context, no trade. No confirmation, no trade.
Time of the day is as important as current daily range in relation to average daily range. Later in the day or when current range near or greater than average range, become more passive. If everything lines up, take the trade but keep targets reasonable.
When in a trade:
The initial moments after getting into a trade are the most stressful for the mind. Stay calm. It is out of your hands at this time.
Whether trade goes against you or not, always think what next. It does not help looking at the DOM, look at the charts. Plan next steps. Think as if you are not in a trade, is a different trade setting up or are the charts suggesting neutral? Some of the best trades are right at the exit of an existing one. Be one step ahead.
If trade stops out, reassess the context and confirmation. No one proved you wrong. You do not have to be right. There is no ego. No one has to prove anything to anyone. Just say, "Next!" and move on.
If trade goes in favor, once minimum R:R is achieved, get out at first hint of unfavorable order flow. There are no fixed targets, instead let the order flow tools show the exit.
When in a favorable trade, watch the strength of pullbacks using the divergence algo to determine when enough is enough. There are no other rules regarding retraces yet so build them with experience. Use the same rules for scaling into a trade.
Commercial issues:
Currently, 2 accounts are available to trade. I have 7 days to go in the TST LTP account. Current balance is ($1,115). Balance required for funding is $750. I will leave this account alone for another week or so. In the meantime, I will start practicing using a new TST 150K combine which I got at a 70% discount for writing this journal. Thank you TST and futures.io (formerly BMT).
I will stick to an all in all out approach so that it is transferable to a smaller account. The new combine is for 20 days so based on some simple calculations, I will trade a maximum of 5 contracts starting out with 2 until a cushion is built. Will reassess at the end of each week.
...End
Much of this plan will remain the same for the next 4 weeks whichever account I trade. I do not want to make changes every other day. I will make only minor tweaks each week. The idea is to gather sufficient data so that there is sufficient evidence before any major changes are made.
I will have to figure out a way to put this all some place where it can be edited. It looks like past posts can only be edited for some period of time and not after that.
Masterfully written and thanks for sharing. I will incorporate some of them to mine. I signed up for another combine, Wasn't aware of getting discount on a combine for writing a journal.
Euro C Up formed at pit open and long bias was further confirmed
Trade 1: Price pulled back to WORH, long from 93.43 got stopped out. In hindsight, there was no confirmation. There were several things wrong with this trade. Neither order flow algo confirmed. Stop was exactly at DP high which was also around the Euro ORH.
Trade 2: Price pulled back to Euro OR. Waited for 2nd pullback (this wasn't necessary, order flow had already confirmed), confirmed divergence and long at 93.26. Once US ORH was cleared, protected trade (trade was 30+ ticks in favor at this time), anticipated pullback to ORH, saw that the downward strength was very low, so held it. Saw orderflow diminish on 2nd leg up and placed order to get out 2 ticks above high at 93.70.
In hindsight, the exit was also good for a short scalp but there was no context so no trade.
Bias is still FULL LONG but ADR approaching and most likely done for the day.
11:00: Not trading anymore but marking observations for benefit of trading plan:
What to look for on a FULL BULL day
11:16: Posted about Friday's setup on MFB's thread. Thought I would record an image of what I was talking about for future reference:
Price made a Euro A' Up around 6:45. Pullback to RPL and EORH can be seen with evidence of diverged orderflow. Strength can be seen in the orderflow as price makes new highs from the bounce.
Monthly pivot range for Dec has been established:
MP High: 93.65
MP Low: 93.32
ACD methodology describes the monthly pivot range as a significant range for the rest of the month. Once price moves above or below the range, it tends to stay that way for the rest of the month.
After being below the monthly pivot since mid-October, today price is above December's range for the first time. Is it going to stay that way?
Take a look at the chart for 2013. 8 out of 11 months, once price moved away from the range, it did not break the monthly pivot for the rest of the month after moving above or below.
A close above 93.65 or below 93.32 is significant tomorrow and I will be watching this range and how price reacts here. First/Second day of the month has set the tone for the rest of the month on several occasions in 2013
Same thing for 2012. Similar behavior can be seen during 2012
All of the backtesting, reading the book numerous times, coding it to perfection etc, does not bring in automatic trust. It takes time. It was a picture perfect setup that I had already anticipated last night. Just didnt trust it enough.
Placed the order at 93.78, as it was about to be filled, I cancelled it for reasons I cannot explain.