A month of GBP/JPY through the eyes of ACD Methodology Mark Fishers ACD Methodology from The Logical Trader
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I've not had the time to spend on Forex over the last several
months but I decided to begin the new year with a little review
of the ACD system which i learned while reading Mark Fishers book
The Logical Trader. For myself I really
want a visual record over time to see how well the market respects
the ACD lines that I draw each day after market open. The ACD
system is actually quite simple and strait forward. I'll try to
sum up the system briefly but please refer to Marks book as there
are many rules that will define how successful you are in trading
with the ACD! In describing the system I have left a few details
vague but you can fill yourself in by grabbing a copy of the book,
see my review of it here to learn more about the book itself:
The
Logical Trader.
In a nutshell:
1. At a market Open (i.e. preferably the market open of the currency your trading), take your first 30 minutes and mark the High and Low of that time period. Thats your opening range. I consider the opening range a no-mans land and though there are some exceptions, trading within the bubble is not generally a high probability situation.
2. Depending on your currency, the ACD system has a different number to use when determining your A-Level. You place your A-Level lines above and below your opening range. The A-Level indicates a high probability entry zone if price action breaks the line and stays there for a period of 15 minutes (half the opening period). A confirmed break defines an A-Up day or an A-Down day. This is a once a day occurrence.
3. Your C-Level is determined the same way as your A-Level's, only your C-Levels are marked above your A-Up, and below your A-Down instead of the opening range. The C-Level is your first take profit area, I make a point to take profit professionally by closing 70-90% of my position and leaving the rest on the table to stop out (personally i trail on a 3 day rolling pivot).
4. Your B and D Levels are your stops for A's and C's which I suggest you use your own level of risk to set yours.
Notes:
The whole point of a system is to provide you with an edge over
the market. This system is best to trade your first A-UP or A-Down
with the highest probability. Mr. Fisher suggests that your next
trade opportunity is trading or fading your C-Level (up or down).
For Forex specifically, I think you can look for trades based
on market reaction to any of the ACD lines with tighter stops,
though after youve got your first A-UP or A-DOWN the other trades
are more risky so adjust your orders accordingly.
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