Frank

OEC needs to add VWAP to its functionality.

This article is really about a concept written about in the 1990's about how to increase the reward-risk relationship. There are 2 ways to make your trading better. Find strategies that increase your ‘edge’ (the mean 'expectancy' of a trading method over the longer-term)--- difficult to do as trading is a very competitive game and there will always be a cap on how high you can get your % win rate. Second, and this is where the world is going -- find strategies that have solid edge but you can repeat them more (high frequency trading). The sharpe ratio increases with either of these 2 ways. I wrote about this here: http://www.traderslaboratory.com/forums/f3/the-structure-of-trading-strategies-3603.html The example I use is how to 'think' about strategies and taking the popular game of roulette as a useful example. I learned this while reading a book called: "Active Portfolio Management" by Grinold & Kahn. This book is considered a bible by many money managers --- it is total overkill so I don't recommend the book unless you are a math major headed for quantitative finance. But the points made in it apply to all strategies, including short-term trading. If you compare two methods of trading, the one with lower edge might be a much more efficient strategy if it is high-frequency --- this is because the # of trades increases the statistical significance of the results and just like the house edge in roulette -- as the house, you would much rather do many spins at $25k each than just one roll at $1 million. In fact, you wouldn't even bother with the risk of $1 million, despite knowing you have an 'edge' in the game.

The idea here is similar to the ADX indicator. It is a way to show how volatile price is relative to the volume weighted price (VWAP) and compare it to the past 3 days at the same point in the day (it should be used on 2-min chart to properly reference the prior 3 days). Market tends to move from range into trend and trend into range. The idea here was to show if price is trending or in a range. Sometimes, price moves away from VWAP consistently for hours -- this is a trend. Other times, VWAP is a magnet as the market coils.

trader273, I have coded some basic stuff in OEC's compiler having been using EL for a few years -- but I can't do paintbars. Have you been able to run paintbars in OEC? or ShowMe's?

I did Lasik many years ago and it was honestly a great, great thing -- the world changed big-time --- ie, seeing street signs clearly, movies clearly, no more eye fatigue from contacts etc.... I highly recommend this procedure -- you are out of commission for about 36 hours -- very strange sensation where very blury vision -- but all it did was make me very sleepy so I slept most of that off and was fine 2 mornings after an afternoon procedure. When I did it, it was $2,500 per eye -- this was 2001. My vision today is still excellent. In the video they make you watch, they say there is nothing it can do for things like long-term reading of small print -- that just goes with age and you will need reading glasses for that someday --- but this procedure was life-changing good for me. Honestly, everything was so clear felt like I was on drugs and world was 3x better looking than before.

<<Frank, how does this information ratio change when you increase the expected return to something like 100% per year or 1000% per year?>> remember, the key is the # of bets a strategy uses. if 1 bet and 100%, the Information Ratio is 1.00 x 1 = 1.00 this strategy is significantly worse than a 10% strategy with 400 trades in a year .10 x sqrt(400) = 0.10 x 20 = 2.0 The main point behind this concept is not being fooled by randomness. You must have statistical significance (which is what this simple formula solves for) or you are quite likely to just be fooling yourself. Warren Buffett has a big edge and small number of bets -- this is of course very powerful too -- but unavailable to most mere mortals -- and you are right, can't be sure if luck played large part there. Not saying it did, just can't prove that it didn't statistically.

in multicharts go into the quotemanager and add the symbol ESZ8 (for S&Ps) --- then go into the 'Tools' drop-down menu and open 'Data Sources' then click on 'Settings' and change the server to: Server: prod.openecry.com Port: 9200 input your username and password and it should feed Ecry data into multicharts.

Paintbar functions don't appear to work for me when trying to import them to the .el import clipboard --- that would be nice to have.

correct the conditions to: condition1=((h+l)/2)>cc; condition2=((h+l)/2)<cc; note that times are west coast times.

can any of you Ecry users help out. I am new user and have been struggling for 1/2 an hour trying to figure out how to change an indicator to a sub-chart (below the price chart). I cannot figure out how to do this simple chart adjustment. In Easylanguage code you would right-click into the properties menu and check something to either be 'right axis' or 'same as underlying data'. But the EL editor in OEC doesn't allow you to do this. help

brownsfan, we are talking about 2 different things I think. I am talking about asset classes -- you are talking about components -- such as 'oil' -- a subsegment of commodities. When I think correlation, I am only considering those asset classes that first offer a real long-term return. I don't think commodities do that. Commodity Trading Advisors might, but the raw commodities have much to prove over the coming decades, in my opinion.

I don't consider Forex to be its own asset class. Guess you could argue it well your way. Forex is a component of other asset class returns in my opinion. Ie, if you own int'l bonds, you figure in the Forex. If you own int'l stocks, you figure in the Forex. Effectively, when you buy forex, you are buying SOMETHING else --- ie, even if just yield on int'l cash

Cash, Treasury Bonds and Investment Grade Bonds Are The Only Assets Uncorrelated to ES over time. ETF's would be: AGG BND SHY IEF TLT TIP LQD AGG is the largest bond ETF in world and its about ~55% treasuries/45% corporates.

You should check out VIX futures -- and more specifically, study the fascinating relationship of VIX vs VIX Futures. Larry McMillan has done some excellent work on this topic. Read the first few pages of this piece he did for a primer on the 'term structure of VIX'... http://www.quickfilepost.com/download.do?get=183daccf71022a894ab24962f03732b3 you can get end of day VIX futures data here: http://cfe.cboe.com/Products/historicalVIX.aspx

you are asking a question about why the structure works. there is an arbitrage mechanism here that makes it work and the mechanism is the expiration. Without a mechanism for arbitrage, then it wouldn't correlate 99%+ Closed-end funds do not have an arbitrage mechanism --- and so the funds trade at big disounts/premiums to their underlying net worth -- so there is significant 'tracking error'. If closed-end funds 'expired' at a specific date-- then you could arbitrage it. Exchange Traded Funds do not have an expiration so they came up with a different structure for arbitrage. They created a third-party into the mix to create or redeem the ETF shares should they trade out of line with the underlying index. These third-parties can arbitrage this with a simple computer program and do it for risk-free profits.

futures are a derviative of an underlying index and futures have an expiration date. at some point of buying, you would theoretically own the future delivery of the entire market. everyone else could short to you the futures -- with a mark-up (the 'ask') and then they could buy the underlying index to be fully-hedged... at some point, there would be no more stock to buy and so they would simply not sell you any more contracts. instead, they just wait until expiration -- as 'they' would no longer be short an expired contract --- and now they simply deliver to you all the stock in the world. You would own all the stock and they would have made the arbitrage profit.

I think trading edge derives from market makers. A market maker buys on the bid and sells on the offer, the spread is roughly his edge. My friend is an option market maker. In this case, he sits on a relatively wide bid/ask spread and a customer hits his bid with an order -- he instantly hedges that position by trading an appropriate amount of stock to offset this position. The difference is therefore, the fact that he sold on the bid -- a price he has calculated to be a discount to the cost of hedging. In regular market making, your edge is less tangible. A casino knows his edge because the game has mathematical properties where 'past does in fact equal future.' In regular trading, you never know if future will be different than the past -- so any mathematical model may be optimized to one set of past rules -- where a new set of rules may have instead been created. That said, there is much literature on this subject in portfolio management. Instead of 'edge' --- you think of 'reward/risk'. Reward and risk are estimated and ratios are created to summarize/describe different strategies. Many different strategies have proven to be uncorrelated over time such that 'reward/risk' on average can be estimated with reasonable accuracy for a properly diversified portfolio.

I was with TS for 3 years and it was the same circle... big problems ==> outrage ==> TS fixes problems... a few months go by ==> big problems ==> outrage.... repeat over and over. I have come to the conclusion that Tradestations architecture is flawed. Simple as that. The idea of combining best-of-breed software (EL) with a brokerage was beautiful on paper -- it just hasn't worked out in execution. Tradestation will figure out the current problems and then there will be new big problems. It is not surprising, this is the history of the software industry as system environments are dynamic and wreak havoc on dated architectures.

This chart has clear Elliott Wave structure to it. Within that bigger structure, the Taylor concepts help fill in the intraday structure.

ah ok, now its clear why that chart is messy... I consider DAX to be a 'subset contract' -- the German market is only 4% of the world index market value while S&Ps represent ~40% -- thus, much of DAX's movement is driven by S&P movement and for this reason, I don't think my style -- which is partly dependent on 'time of day' -- is appropriate for trading DAX.

is that an ETF? the chart structure is messy but at least partly readable. I am not a pure Taylor guy -- I find Taylors core concepts to be brilliant -- but I find excellent concepts in other schools of technical analysis as well. the chart below is analyzed part with Taylor and part with Market Profile. I didn't look at classic 3/10 oscillators because I wasn't sure what security this is. I will sometimes use a little low-level Elliott Wave analysis to help support the technical structure as well.

ok, I am away from my main computer but here is an example from this week. Note the important, crucial concept from Taylor -- watching price action relative to the previous days high or low, whichever came last. is price being rejected (market profile 'tail') or accepted once it attempts to leave the range of the previous day?

Tradestation is a worst of breed company with one huge exception -- EasyLanguage. EL is a kick-ass product and there is nothing like it. Too bad this application is buried within a piece of shit company otherwise. Meanwhile, Interactive Brokers 'Universal Account' is a kick-ass feature. I am just switching myself having given up on Tradestation. I tried Ensign Software for a few months but decided I don't like it. I am going with Interactive Brokers and running Multicharts. I need the functionality of EasyLanguage and the the ease-of-use of Interactive Brokers universal account. I do not need every bell and whistle, I just want to be able to write simple indicators designed to read order-flow in exactly the way that I want -- and EasyLanguage/PowerLanguage (Multicharts name) accomplishes this goal.

I wrote this a few months back as a summary. While some of my thoughts have evolved since then, I think this has some pretty valid points to consider which summarize some concepts from Taylors Trading Technique book: TAYLOR/MARKET PROFILE HYBRID - VERSION 1.1 (MAR 2008) Summary: The Taylor Trading Technique is a method to trade the inherently choppy nature of the futures market. It is easiest to understand Taylor ‘structure’ by first agreeing to view the market as Taylor did, one that is being driven by large ‘smart-money’ manipulators. You can choose to change the reason for WHY the cycle exists if you wish, but I find it’s best to first believe in it as Taylor did as his technique then becomes quite logical as to why you are doing what you are doing each day. Later, you can choose to believe that it is simply the ‘nature of free markets’ that causes a Taylor-like 3-5 day cycle to exist. But for now --- go with it --- big-money manipulators are behind it. Taylors core premise was that the market was not only manipulated, it was manipulated in repetitious ‘stages’. That is, there are different lengths to the stages (ie a 3, 4 or 5-day cycle) --- but the structure is that of 1) a buying cycle and 2) a selling cycle. These stages repeat over and over again in a few different ways that can be categorized. Another thing to realize is that Taylor quantified the market. He kept a detailed ‘book’ which measured the moves. Each day had a name and Taylor would specifically quantify the length from the ‘buying day low’ to the ‘sell day high’. The decline for Taylor was from the ‘short sell high’ to the ‘buying day low.’ But rather than go into all of the ‘book method’ specific calculation, I want to stick with the higher-level concepts and importantly, how they relate to other technical concepts. Taylor believed that one could interpret what the big manipulators were doing by watching highs and lows across days. Key ‘Smart-Money’ Manipulator Strategy: Force a ‘violation’ of the previous day low in order to create panic and then buy cheap stock Force a ‘penetration’ of the previous day high in order to unload and/or short overvalued stock That is it. Essentially, ALL of Taylors ‘plays’ center around positioning and re-positioning himself to benefit from this manipulator strategy. For example, Taylor would watch the closing action closely to set up the next day ‘play.’ If it looked like the market was going to close low in its range (low made last), Taylor would know that the ‘next-day’ strategy of large manipulators would be to push the market down further, below the low (low violation) and flush out the weak – where cheap stock could then be purchased. Therefore, Taylor would always be watching to see if ‘high made last’ or ‘low made last’ – his terminology for anticipating the closing action. All of his plays are about positioning (and re-positioning if necessary) himself to stay synchronized to the current manipulator buying/selling cycle. After studying the core Taylor concepts more closely, you will see that the technique is closely related to many other technical trading concepts. It’s a lot of the same concepts but thought about in an anticipatory way. By categorizing the structure of the market into a particular grouping, you are then positioned with a plan as to how the movement may unfold. Interestingly, the main concepts of Taylor mirror the concepts taught in Market Profile. Taylor avoided the noise of the intraday market and patiently waited for his core ‘play’. The location of where his play sets up is exactly consistent with Market Profiles focus on ‘trade location’. The concepts in market profile are an excellent way to add context to the Taylor buy/sell day rhythm. Since Taylor did many calculations to augment his method, and since I am not presenting those calculations, I find that the market profile concepts are an excellent way to fill in this gap. Summary of 'Concepts': Best to think in concepts rather than rigid Taylor rules. Discussion of Concepts (note the interaction with Market Profile): From Jim Daltons book ('Markets In Profile'): “The end of an auction offers the moment of greatest opportunity… risk & return are asymmetric at this point.” This is exactly what Taylor did, located the end of one auction and the beginning of another. When you are right, the rewards are large as you are entering at the beginning of a new multi-day move. Dalton: “Excess marks the end of one auction and the beginning of another.” Again, this is exactly what Taylor did with his focus on the ‘violation’ of the previous day high or low. So these are the assumptions: 1. The greatest reward-risk opportunity is when one auction ends and a new one begins 2. Auctions end with ‘excess’ Thus, the ideal location for entry is precisely on the price bar that completes an ‘excess low’ or an ‘excess high.’ Now, how to determine when an ‘excess low’ or ‘excess high’ is in place and therefore one auction has ended and a new one is to begin? Jim Dalton summarizes this well; ‘excess’ can be seen in 1 of 2 ways – a tail or a gap. But note how the ‘tail’ (buying or selling tail) is really the same concept as the ‘violation’. Concept 1: The ‘Violation’ (Taylors version of a ‘Tail’) A violation is the tendency of the market to exceed the previous days high or low. It does this on the vast majority of days (in 2007, the market did this on nearly 9 out of 10 trading days). Effectively, the market carries residual momentum from the previous day and it spills into the next day and results in a ‘violation’. This was when Taylor watched closely. Sometimes, the residual momentum will be very strong and carry price far above the previous day high. Other times, the market will hit resistance and this violation will form a ‘selling tail’ and price will retreat back into the prior days range. Dalton would call this ‘returning to value’ after attempting to auction away from it. Thus, as Taylor practitioners, you watch price action relative to that previous day high or low and then look to fade it as your core entry. (By the way, Dalton also often uses this previous day high or low as his ‘reference point’ in his newsletter – Taylor understood Market Profile inherently before Market Profile was invented!). If the market closes high in its range, the high of that day becomes the key ‘reference point’ for the next day. If the market closes low in its daily range, that days low becomes the key ‘reference point’ for the next day. In general, a move that violates (exceeds) that days ‘reference point’ (the previous day high or low) can either be ‘accepted’ or ‘rejected’ by the market. Taylor called the fine-tuning of entries as ‘watching the tape.’ The real-time way to monitor this ‘acceptance/rejection’ tape-reading is not the focus here. But clearly, watching volume, oscillators, ticks and market internals are the modern ways to do this. If you have strong volume, then you likely have ‘auction continuation.’ If you see a nice oscillator pattern (ie First Cross or a good 3200t divergence), these are forms of fine-tuning the entry in a market with much more range than Taylor ever had. Back to price acceptance vs rejection. If price is ‘rejected’ after violating the reference point pivot (the high or low), you have ‘auction reversal’. This rejection is the ideal Taylor entry as you have big reward when right and you have some decent odds on your side if you can be patient enough to wait for the right spots. Concept 1A: ‘Before The Violation’ – The Power Play If the violation signals a potential ‘excess high’, then what about the period of time before the violation has occurred? Since Taylor wrote the book in the 1950’s, the markets have clearly changed a bit. The 24-hour nature of modern electronic futures markets has created a new ‘Taylor-like’ trade. As stated, if the market closes strongly, you would expect the market to exceed the previous day high the next day. Thus, if the market closes strongly and the nighttime session takes price down off that high, you have a potential ‘power buy.’ (Power buy is a LBR name for a trade that enters on a retracement with assumption that there is still residual momentum about to re-establish itself once the counter-trend correction completes). Taylor didn’t do this because he would generally hold overnight and sell the next day on the violation. Nevertheless, the ‘power play’ is very consistent with the expectation of how smart-money manipulators move the market around. As you can see, the power play trade will not be consistent with the name of that particular day. For example, a 'power buy' will generally occur on a ‘Sell Day’ – that is, the day AFTER a Taylor ‘Buy Day’. The buy day with a strong close indicates a new directional auction up. The day after the buy day carries residual momentum into the sell day. Therefore, the first good play will very often be to buy and play the residual momentum up (often entering before regular market hours). This may be confusing at first, but remember that you are expecting a ‘high violation’ – and a long on a Sell Day that has not yet violated previous day high is a very good play. If the market gaps up overnight, then there is no power buy play. Taylor would generally be long from the buy day and sell-out of the long into the Sell Day violation of the Buy Day high. Thus, if trading the 'power buy' rather than holding overnight -- you give up the overnight gaps up but you do gain in 2 ways. First, you won’t get caught in gaps down. Second, you will improve your profit by buying back in on the power buy rather than riding this frequent overnight correction out. Similarly, after a weak close with some good volume-based selling, an overnight move up sets up a ‘Power Sell Day’. Despite the next day often being a ‘buy day’, the first trade is often to short and play for the violation. Taylor called this ‘Buy Day, High Made First’. Once the violation has occurred, you now must be careful of shorting since you now might be shorting right into a ‘buying tail’ (where manipulators might be buying cheap stock). Depending on the prevailing conditions, the play will now often be to go long and play for a ‘Buy Day/Low Violation’ in anticipation of 'High Made Last' ('Low Made First'). Concept 1B: The Gap (Market Profile) The second form of ‘excess’ after the violation/tail is that of a gap. (note this is not Taylor here -- this is Market Profile -- Taylor acknowledged this type of gap -- but stayed away from trading it). Dalton: “A gap at the end of an auction that occurs in the direction opposite the most recent trend signals a reorganization of beliefs. Market participants have changed their perception of value so dramatically that they simply begin trading at a completely different price level.” Thus, a gap can also confirm that an ‘excess high’ was just achieved. And we know that the moment at or just after an excess high is the location of greatest return/risk. A ‘gap down’ will obviously not be a ‘high violation’ but the ‘excess gap’ from Market Profile concept is very consistent with Taylors concept in Chapter 10 ‘Failure To Penetrate.’ Gaps are trickier because your core expectation is that the market will exceed the previous high or low. If price gaps in the other direction, you might be tempted to still play for that previous objective. And you might be right in doing so. There are many gaps that are simply shakeouts that set up good power-buys. Did afternoon players overdo it and push price up too high and are now trapped? Or is there still residual momentum left-over from these same volume-players? We know that there is a tendency that the market will often trade back into a gap. However, when it doesn’t, you have an unfilled gap and many traders who went with the close expecting continuation are now badly trapped and will be unwinding, adding fuel to the fire. So what do you do? This is where ‘low to high’/’high to low’ counting can help. If you just had a good ‘buy day’ after a multi-day down move, you can be more confident that you have a power buy rather than a gap & go the other way. If you have had two consecutive up days and then a gap down, now odds are higher of auction reversal. Three consecutive up days and a gap down, odds are higher still on reversal. Auction Reversals and the 15-min 'First Cross' trade (enter Holy Moley) After 2 up days and a gap down, you are deciding whether you will buy and play for a power buy (play for the more common high-violation/selling-tail) or whether you should ‘go with’ the gap-down on what is likely a 'sell-short day'. The gap down means there was not a high violation and therefore large manipulators haven't yet forced price up enough to unload their stock. Shorting may be tough in this spot. Going long might be the better play – realizing that you may be playing with fire here after 2 up days and a gap down. But what if you see some pretty strong downside volume? Well, you can try to ‘go-with’ this on the short-side. Look for a Russell ‘short-skirt’ near the open and play the momentum. An alternate method is to simply wait. You can watch how strong the down momentum is and decide if it is for real. The reason for waiting is simply to avoid trading in many days that simply peter-out after some initial whippy action. By waiting for the 15-min First-Cross sell, you can filter all those other days out and only enter on days that have demonstrated strong volume-based moves. This will be signaled if the gap remains unfilled and therefore an auction-reversal has taken place. You should also have strong selling pressure (good downside volume). Ideally, you may also get an ABC-up pattern after the hard morning move down --- which sets up the ‘holy moley’ short trade – 15-min FC Sell in the 3/10 oscillator combined with 'ABC-up' on day 1 of a volume-based new directional auction. One other good rule of thumb regarding ‘Auction Reversal Gaps’. If after an UP auction the market makes such a gap as to gap down through the previous days Opening Price --- and holds price well in the morning session -- then don’t even think of trading against that ‘shocking’ gap. This is a difficult structure to trade, however. For this reason, one way is to wait for the eventual 15-min First Cross trade (watch volume and see if the gap remains unfilled – you will have time to digest this as the 15-min trade will take a while to set-up). Concept 2: The Inside Day Given the importance placed on highs and lows as key reference levels by Taylor, what happens when there is no ‘violation’ of previous day high and no violation of previous day low --- ie, the 10-15% of days that are ‘inside days’? The answer is simple and straightforward – ‘go-with’ the next days initial momentum away from the inside day (ignore any existing Taylor count). The day following an inside day will start a new ‘Taylor count’ and will serve as day 1 of a potential 2-day move (one strong day and another day that ‘violates day 1). Concept 3: Residual Momentum (High or Low Made Last) This concept is really just a point about how important the afternoon price-action is into the close. Big money institutions generally save a good deal of their buying and selling into the afternoon session (I used to be an institutional PM and I discussed this many times with other PM's at other large institutions). Performance for institutions is calculated using end of day pricing. If you are a money manager, the last thing you want to do is bid XYZ stock up with your buying all day only to have you complete your purchase too early and have the security drop like a stone once you are done. This is the worst of all worlds for your performance, you paid up for it intraday and it closes low relative to your cost-basis. Don’t underestimate this factor. Tomorrow will always be unknown for the Portfolio Manager (the stock could go either way in the morning) but performance TODAY will be posted using the 4pm closing price – and performance TOMORROW will again use that 4pm closing price. Price might do anything up until 4pm tomorrow, but the point is that it is the collective action of institutions that are in control at this time of day. For the futures, I like to watch how price closes relative to the volume-weighted price (VWAP) for that day. Concept 4: Key Reference Point This is simply a point about how to interpret price action. It is much easier to understand the underlying forces at work if you have a level in mind. It keeps you honest from fighting the tape too much. 3 possible reference points help me personally. 1) the previous day high 2) the previous day low and 3) the days most heavily traded price. What is the market doing relative to these 3 prices? Learning to interpret action relative to key reference points makes trading much more structured. Concept 5: Market Profile I find market profile to be a very nice complement to Taylors structure. Concepts from Jim Daltons ‘Markets In Profile’ book such as ‘attempted direction,’ volume-based rejections following ‘excess,’ ‘profile shape,’ ‘balance,’ ‘auction reversal’ etc… --- these are all excellent ways to augment the variations in the Taylor-rhythm. Remember, Taylor had many, many detailed calculations that were key to his ‘book method’ that I did not go into here. I find that Market Profile will fill in much of this gap that is left from not performing these calculations. The technical patterns will always have noise and attempt to shake you out – but the underlying ‘structure’ of the market is residing in the key concepts of ‘market-driven’ information (what Market Profile is all about). Some Feedback Notes: A long-time Taylor practitioner gave me one piece of feedback since I wrote my first Taylor summary. She mentioned that she thought one of the most important concepts in the book was about how Taylor would hold overnight for follow-thru the next day. I have discussed the night-session ‘power play’ here. This is really the same force/concept at work implemented slightly differently. Both ideas are that the residual momentum off a strong close will play into a violation the next day. Thus, they are consistent but it should be noted that I did not stress this point while Taylor very much did --- he generally played for the 'continuation gap' in the direction of the close --- although he did mention that if the gain on the trade was large going into the close that locking-in that gain is worth considering. To some extent, we live in a different world than Taylor. His examples in his book often showed markets with very little range to trade. Today, we routinely get 20+ pt range days in the S&P futures and can trade nearly 24 hours a day. It is up to the reader to figure out entries around the core concepts -- but it should be noted that the overnight continuation is a powerful concept. I will leave it at this - very often, the market will do something that leaves you without a ‘Taylor entry.’ For Taylor, who liked to enter in the first few morning hours, the most common ‘trade-miss’ is when there is an afternoon reversal after a ‘violation.’ Here is the time to consider using the overnight power play to initiate an entry as you may very well have missed the entry due to the time of day that the reversal occured. Description of Various Classifications of Days: The ‘Buy Day’ (typically follows multiple high to low days) A categorization of buy days is more useful than the blanket ‘Buy Day.’ There are 3 primary buy days: 1. Buy Day with Low Violation – Look Long - 2. Buy Day with Good Gap Up – Look Long - 3. *Power Sell Day – Look Short (Same as ‘Buy Day, High Made First’ – no ‘Low Violation’ yet) A ‘Buy Day/L.V.’ is exactly that, a potential buy AFTER a downswing in the market culminating in a violation of the previous day low. This extension below the low is a ‘test’ to see if the market wants to continue down or simply needs to go a little lower so that savvy buyers can relieve weak longs of their positions. A Taylor follower will wait for this violation of the low and then look to go long. The ‘Sell Day’ The Sell Day categorization is the most misleading name of all. It should really be discontinued but since it is a well-known term, we will simply sub-divide it like we did the buy day. 1. Sell Day with High Violation = Standard Sell Day/Expect ‘Range Day’-- Sell Buy Day Longs and/or any Power Buy Long you took overnight 2. Sell Day with Low Violation = This implies a violation of the low made on a ‘Buy Day’ – called ‘Buying Day Low Violation.’ You still look long but you now keep profit target conservative and look to exit a long on a test of the ‘Buying Day Low’ --- thus you must only buy on a deep move below the ‘Buying Day Low’. 3. *Power Buy Day – Look Long (Follows a Buy Day – but there has been no High Violation yet’) The Sell Day follows a buy day. Sell Day/High Violation Once the market has used up its residual momentum from the previous days strong afternoon session close by violating the high of the previous day, this was Taylors spot to sell – hence the name, ‘Sell Day.’ Resistance will now often come in and you can look to short the market. But what is your objective for the trade if you short? You can’t play for the previous day low – that is a long way off and is an unlikely (but occasional) occurrence. If the market shoots FAR above the previous day high (most likely through a large gap up) then the objective for a short becomes the previous day HIGH. If the market finds resistance not far above the previous day high then you will look for a trade back towards an EMA (exponential moving average). The logical EMA is the 15-min EMA – though you should not be seeking a large return on this trade – just get in, get your profit and get out. General Guidelines: when stock is cheap (as measured relative to previous day low), he liked to buy. When stock is expensive (as measured relative to previous day high), he liked to sell or sell-short. Except in the case of the ‘higher bottom’ --- Taylor did not generally trade when price was inside the previous days range. (note, this play is often the beneficiary of a short-squeeze – for it to set-up, the market will have violated lows on multiple consecutive days, you do not always have to take this play of course, but it is nice to know the ‘Taylor play’ – as it may keep you from shorting into a location that often gets short-squeezes). The Sell-Short Day 1. Sell Short Day with High Violation – Look Short 2. Sell Short Day with Good Gap Down – Look Short Sell Short Day with High Violation – pretty straightforward. Short above the previous day high and hold for a good move down. No going long on a sell-short day. Sell Short Day with Good Gap Down – this is not a Taylor play. This is a market profile play. Taylor would leave this kind of day alone. Beware of shorting into an ABC-down power-buy. This is where waiting for the 15-min FC sell comes in if the day has shown strong selling pressure and is indicating it could be dynamic down day. Otherwise, you will often get narrow and or inside days in this spot as the little bit of residual upside momentum from the last two days leaves a bid under the market and you have not trapped enough longs like you would on a ‘high violation’. If gap goes unfilled – it is still worth a shot.

hi dbntina, I have been referencing these stats a lot and they are great. I was wondering if you would be willing to run the same code on an ETF to see if its statistical characteristics are consistent with S&P's. The security is 'EFA' -- which is an extremely popular ETF that tracks all the major international markets. Its very liquid and is interesting because its a foreign ETF and was curious how often foreign indices continue to trend on intraday basis relative to the S&P's. mostly interested in when the FINAL high or low is made (whichever comes LAST)... thanks for any help, frank