Does the ACD Trading method work?

Does Mark Fisher’s ACD trading method really work?   It is actually a difficult question to answer, because the ACD method is not something that can be plugged into a computer and backtested.  

The ACD approach to trading is not a trading system in and of itself.  Rather, it is a lens, or framework for viewing the markets and spotting trading opportunities. 

If you are not familiar with the approach, the building blocks are basically this:  An opening range is defined by a period of time after the market open. In this example we will use 30 minutes.  After the completion of the opening range, a certain amount is added to the opening range (for buy levels) or subtracted from the opening range (for sell levels) to create the A value.  The B value is the other end of the opening range from the A level, which is used as the stop loss level for the initial trade.  The C level is the breakout level on the opposite side of the A level.  A C level only comes into play if an A signal has already been generated.  The D level is mirror image of the C level.  It is the stop loss level for any trade generated at the C level, and equal to the other end of the opening range.

The above all sounds very confusing.  Let me map it out with a chart example:

The ACD method can also be applied to longer term time horizons.   On a monthly chart, the opening range would be the first day of the month.  A, B, C and D trading levels are then framed around this first day.

To say the above is the ACD method is a vast, vast understatement.  You really can’t understand what the method is about without reading Mark Fisher’s book, “the logical trader”.   It is in my opinion one of the most important best books on short term trading and price analysis. 

I use ACD type analysis all of the time, both in real money trading and in backtesting.  Do I calculate ACD values or any of his other indicators?  No, in fact I do not.  My use of the methods is more conceptual and less based on the actual indicators. 

I actually attended a seminar Mark Fisher put on 9 or 10 years ago in NYC.  Fisher is pretty funny and a great speaker, so the event was both fun and informative.   However, the book is actually pretty complete.   There is no reason to go to a seminar or anything else. 

The best way to get started with ACD concepts is to simply read the book, then start tracking the approach on the markets that you trade.   Don’t take the method as the Holy Grail or bible trading.  As you learn about the method and the markets you are trading, you will find that you lean on the concepts, not things like “how to calculate A values, etc.  

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