How To Use The Fisher ACD Method "A" Up To Identify and Trade On a Trend Day Up
Aaron Armstrong, Oct. 01, 2007
I've been getting a lot of email inquiries about Mark Fisher's ACD method "A" up levels and pivot range and since today was a perfect example of how to use it to identify trending moves I thought I would review today's action through the lens of that method.
In the chart above I have made several notations that should be the price action and signs that you would take note of to identify and successfully trade for what you expect to be a Trend Day up. First I should mention that a Trend Day up today was anything but guaranteed and certainly far from likely. It is only after you begin to see some confirmation that you can begin to assume more and early in the session today there wasn't much confirmation. The first thing we know is what today's pivot range is since this is calculated using prior day's prices. To download the TradeStation code for the pivot range see the Download Library. Now, notice that the pivot range is extremely narrow, according to The Logical Trader we know that narrow pivot ranges are likely to result in wider range days. This is really the first evidence we have that upside action could be significant. We should also note that prices opened within the pivot range and then quickly moved above the pivot range high and never tested that level as support, price was quickly moving away from the day's value area and doing so with some authority. After the first 20 minutes I had the price levels to set the opening range high and low, from there I take 20% of the 20 day Average True Range and add/subtract from the opening range high and low to set the ACD "A" values. Keep in mind that the "A" levels should define the bulk of the day's price action and only trending moves that are supported by large traders should be able to significantly trade above the "A" up. My first buy came on the minor pullback from the opening range, I have found that price often moves opposite to the move that first formed the opening range high/low for a brief period. I used that brief pullback to buy SSO, the leveraged S&P 500 ETF, on the idea that prices would likely attempt a test of the "A" up level or at the very least an opening range upside breakout. If price couldn't hold an opening range breakout I would just exit the trade. Once prices did record an opening range upside breakout then I assumed that the strength in financials and the continued gains in the Nasdaq and Global Equities would be enough to get a test of the "A" up. The "A" levels are often the high or low of the day and once you get a breakout move the test of that level can come quickly. I then sold my SSO into that "A" up test because the other critical evidence to support a Trend Day up, the TICK, was not confirming enough. From there on you can see my day trade buys with the green arrows and sells with the red arrows, some partial buys and sells, others the entire position. The key thing here is to utilize these methods to frame the day's action and then setup your trading bias to be in line with that. In this case you wouldn't want to do much selling today and the "A" up would indicate a buy the pullback bias with the "A" up and opening range high as support. So that's what I tried to do, remain long and look to buy pullbacks, but most of all, the "A" up combined with Trend Day up elements told be to hold my longs and enjoy what was likely to be a good day. While I didn't do a great job of that by selling my initial SSO trade I just focused on making the right trades the rest of the day. I finished the day up about 1.2% and I can owe that to responding to the confirmed "A" up and key clues from the price action that kept me from taking too much in the way of profits but still focused on buying intraday pullbacks. Utilizing the "A" down level and the lack of confirmed "A" downs also helped keep me in winning positions and is a large part of the reason for my +8.5% account gain since Tuesday, September the 18th. The applications of this go far beyond day trading and Trend Days because as you can see the "A" levels give you prices to key off of to confirm an upside trend and that can be very helpful when looking to establish swing trades or position trades based on oversold signals. Hope this helps you and I hope this answers some of the questions I have gotten, if you have any more questions do ask.
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