A month of GBP/JPY through the eyes of ACD Methodology Mark Fishers ACD Methodology from The Logical Trader
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Friday Jan 4th 2008: 3am - 4pm EST
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Introduction with Jan 4th 2008:
I'll start off light here to explain what you'll see visually, based on the brief setup rules explained above, you will see the opening range in the image defined inside the blue lines. Your A-Levels are the white lines, and the C-Levels I have drawn in a dotted red line. If you don't see the C-Level drawn, that generally means I ignored it because the line wasn't necessary with price action not approaching the area. I generally mark my starting time with the yellow line (3am London open, EST) and the end of my opening time with a grey line (3:30am ). All my lines are drawn at this time.
Jan 4th, you can see was an A-UP day - denoted by price action penetrating the A-Level and staying there for a period greater than 15 minutes. Between 4 and 4:30am this day was 4 news events for the GBP, but in this volatile time you still saw price action obey the support of the A-Level and the resistance of the C-Level above. A big news day at 8:30am with huge disappointments in both the Nonfarm Employment change 52k less than forecasted, and in the Unemployment rate lead to some major volatility but at the same time you can see how the market reacted to the ACD lines in a few ways.
1. The opening range is like a bubble, price action will generally bounce around within that range until theres enough stimulous to generate a short term bias. Once traders find a direction the opening range is finally broken. Today it did, though without going by other signals that you may be using - its best to wait until the opening range is broken to before you start looking for signals, this opening range is like a no-mans land where bias isnt fully established yet. Ideally we are looking to break or fail the A-Level as our first signal area.
2. After passing through the opening range, the market encountered some resistance at the A-Down line which wasnt confidently beaten until the market failed an attempt to break back through the opening range.
3. Note how the C-Down was penetrated and despite retracing at the end of the London session (12pm EST), price action heeded resistance at the A-Down and continued back down to rest at the mid-session lows for the remainder of the day.
As an example looking at the ACD Methodology, January 4th 2008 is a good one to start. Despite being directly after the holidays, and being a pretty big news day, you still see that the methodology of the system wasn't invalidated.
Could the system have made you money today?:
1. Long at confirmed penetration of the A-UP day, taking first profit At C-UP. This is what the system is for and you could have traded it with confidence.
2. After 8am and before the big news you could have taken a wild ride trading the failure of another pass at the A-UP and made a bucket of money with limited risk of capital. I would never suggest making such a trade in front of those news items but that's just me.
3. Just after the 8:30 news events, I like the opportunity presented by a failed attempt back up through the opening range. Going short leaning against the lower opening range is a higher probability trade now and risk is now limited with that resistance and to take first profit at a C-Down.
4. After London session closed the retrace and failure to breach the A-Down from below is also another good short opportunity.
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