Taylor Trading Technique

[elovemer 10]

...mitsu......

....i have no idea who you are ...... i could care less about anyone's character on any forum.....and don't know what forum you are referring to....and don't care at all.....

... having said that... thanks for the encouraging words.....

 

.....about cycles and inversions.... they don't really have to do with Taylor's method.... just something i came up with and i guess many others have come up with the same type of thing before me .....better to not worry about them and just keep things simple....

.... i just use them myself... but i don't recommend anyone else to use them.....

 

.... about today ... it was a buy day for me .... instead of getting what i wanted.... got a gap up and go..... Taylor says STAY OUT..... unless previously entered long.....

.... my next short day is monday ..... so that is my next play......if a high is made first and early.....

 

.... about my cycles.... the lower cycle ended...... the next cycle to finish is the upper cycle......

.... since price came in early on the lower cycle.... and therefore inverted by running the other way fast..... it is up in the air as to whether the upper cycle end will pull price upwards or downwards.... at least that has been my experience.....

..... but the next lower cycle should pull down......

 

..... if no one else wants to join the discussion or post...... that is pretty pitiful.... :0)

.... the fact that no one is interested in the Taylor method... makes it that much more appealing to me......

[richbois 10]

I went short at 809 (cash) as it was the high on monday.I figured we wouldn't close higher than that. Also figured we would close up on the day but that futures overnight will cause the market to open down weds and for weds to be weak on a short sale day.If we had closed higher i would have averaged in there,and if there was a new high made first,added again to the position-more risk,i know,and lots of assumptions,but so far it's working- futures are negative tonight

Thanks for the chart but i don't really understand what i'm looking at. Eg,what does DP mean,what is bdl at the bottom there,what is ph,how is the ma calculated?

 

EDIT oK,i see from ttt.net DP is decision point and bdl is buy day low,correct? That still leaves ph and ma calc

 

Sorry I missed your question

 

 

There is a possibility of 9 lines for the 24 hour session and 9 for the day session and they are labeled as follows:

 

TTT MAp is the possible Penetration based on the new Moving Average Recap sheet

TTT MA is based on the MA recap sheet and represents either the possible Decline level on a Buy day, possible Rally level on Sell day, possible 3 day rally on SS day

TTT MAv is the possible Violation based on the MA recap sheet

TTT p is the possible Penetration based on the regular Recap sheet

TTT is based on the recap sheet and represents either the possible Decline level on a Buy day, possible Rally level on Sell day, possible 3 day rally on SS day

TTT v is the possible Violation based on the regular recap sheet

TTT PH is the Previous day's High

TTT PL is the Previous day's Low shown on Buy days and SS days

TTT BdL is the Buy Day Low shown on Sell and SS days

 

Any of these labels followed by a "D" indicates numbers from the Day Session.

 

 

MA is for Moving Average.

 

I have 2 recap sheets 1 is based on data from Jan 3,2008

tha second is based on data of the last 20 cycles. about 3 months.

[elovemer 10]

...... today friday was my middle day ..... low made first at 10.45am .....

.... high at the close matched up with end of upper cycle.... though that cycle did not predict a high or low....

... my cycle which may differ from others.... is for a short day on monday ....

.... so will look for a high made first at 10.15--10.45 am

 

.... or else a reaction long on a low made first at the same time.....

....next cycle to end is lower cycle ... ending at 3pm on tuesday ....

..... about today ...

...

[Frank 10]

hi guys,

 

I haven't been keeping up so well with this thread but wanted to contribute and see if there is synergy.

 

I like Taylors method -- but its just a piece of how I think during the day.

 

One thing I ask about is the 'price targeting' of exits vs the variance of getting 'in the money' and then a reversal occurs causing a loss --- and how to quantify this so that your results are consistent -- variance is minimized --- but that your are also participating nicely when you catch a 'taylor type of swing' (ie, a big one).

 

So that is a question, do you go by the past cycles 'median' and use limits at that price??

 

I have spent some time working on 'range' and came up with some ideas -- using the implied volatility 'forecast' that is in the options market (VIX) to quantify expected volatility. I am still working on this but have so far found some interesting things. For instance, over the last 252 trading days (1 year) -- the market has formed RANGE of better than 0.8x the 1-day implied vol forecast 85% of the time. Said another way, convert VIX into a 1-day forecast and compare that to the final range on the next day.

 

The reason I like this conceptually is that implied volatility is always a near-term forecast that is based on real money. It is not historical -- it is forward looking --- this is important distinction vs only using historical data.

 

Why is this useful to Taylor practitioners? Because, if you establish a Taylor type of low or high made first -- then you can instantly calculate a price target the other way for that day --- with various degrees of confidence based on however you feel about it. ie, if a low is made at 800, and implied vol predicts 20 pts of range --- you 'could' say you have 85% confidence that price will trade to 816 (800 + (20 * 0.8))... if you like the set-up a TON, you could say -- hey, this is a 'top quartile' type of situation and therefore target something more like 30 pts off the 'Taylor low' (low + (1.5 * the VIX implied range forecast). Thus, in the previous scenario, you could arrive at a 'stretch target' of 830 (800 + (20 * 1.5)) -- assuming that you are right and the 'Taylor Low' holds. (note I am arriving at these 'confidence intervals' based on past market behavior -- and then making mental adjustments based on how conservative or aggressive I want to be -- ie, I know its very high odds to get X points of range and lower odds to get X+Y pts of range, so there is a trade-off: take the high-odds lower point gain -- or play for aggressive gain and be willing to accept some added variance in your results when it doesn't do the lower odds move).

 

Anyway, just sharing an idea -- so that I am contributing something.

 

This chart quantifies the relationship I am talking about (to be used as a starting point from which to work, this is not a science). To read, take example of RANGE getting to 1.0x the implied vol forecast -- The market gets 1.0 or greater ~62% of the time over the last year (1 - the 38.1% figure listed on the chart at the '1 level'). Another example, the market gets 0.8x or better ~85% of time (1 - the 15.08% figure listed at the 0.8 level) etc...

 

Edited April 4, 2009 by Frank

[Shamal 11]

Frank,

Interesting analysis,

 

What tactics you employ for entry and exit on intraday basis, ie. technical analysis, multiple timeframes , patterns, price derivatives etc. Presume you trade ESmini.

[elovemer 10]

55 point decline

buy day rally 11.5

63.25 point thru next buy day high

total rally

1.15

 

23.75 61.75 2.6

=================

25.5 62.75 2.46 first cycle

===================

39.25 61.25 1.56 second cycle

===================

36.5 43.5 1.19 third cycle

===================

======================

 

55 point decline

buy day rally 11.5

34.75 point thru sell day high

47.75 total rally

- 1.15

[Frank 10]

What tactics you employ for entry and exit on intraday basis, ie. technical analysis, multiple timeframes , patterns, price derivatives etc. Presume you trade ESmini.

 

I just try to look through the noise to determine what I think the 'higher timeframe' players are doing and join in for a piece of it. Synchronizing the daily rhythm with the intraday high/low 'made first' are key in this. I do use some oscillator and price patterns to try to help find trades around this and I am always trying to quantify biases that can help in this regard through the use of statistics (ie, such as quantifying the relationship of VIX and intraday range).

 

One thing of secondary importance to me is the label of the days -- ie, buy day/sell day/ss-day. While many days do become clear-cut with labels, I find the market profile 'auction' to be a better way to think about the same thing Taylor was doing with his 3-day labeling system. But I view the Taylor technique and market profile as entirely complimentary to each other -- not that one is better than the other, they are both very useful.

 

Taylor was all about 'positioning and re-positioning' himself using the high and low violations (or the 'failures to penetrate') to guide his bias. I find this to be an extremely useful construct.

 

The issue I bring up is that of how to balance consistency with playing for occassional big profit. We can all agree that today (monday morning) is likely a good time and location to try a short (high violation after extended up move) --- but where to exit should this prove true and why??

[Shamal 11]

Thanks Frank,

Actually for exits, there are some excellent pointers on the Wyckoff forum with the use of trendlines.

[elovemer 10]

...once again ....didn't get much of a high made first...

.... but the high made first would have to be the 10.00 high.....

....edit... my next lower cycle ends tomorrow at the close....

Edited April 6, 2009 by elovemer

[elovemer 10]

...once again ....didn't get much of a high made first...

.... but the high made first would have to be the 10.00 high.....

....edit... my next lower cycle ends tomorrow at the close....

 

.... they stole our short day .... with the big gap

 

... and it looks like they might steal our buy day ..... with another gap up.....

[Frank 10]

so true elovemer.

 

here are all the 'close to close' changes for ES this year (ranked from high to low) -- you can see how its not so common to get huge point moves vs the previous close -- so the location for shorting today was tricky with the gap. in shorting, you would be implicitly betting on getting a large move vs previous close -- if you expected continuation down that is... a high violation/high test would have allowed much better location for the market to 'start high' and would allow more profit room to the same level/zone --- 815-820.... shorting was fine -- but had to keep expectations in check and respect the lack of continuation below the previous days low...

 

we ended up right in the lower middle of the std dev bands at 9.75 pts (all numbers are in absolute terms fyi)

 

[Frank 10]

one more post:

 

page 48 of TTT:

 

 

[remymor 10]

Hi All,

 

Enjoy reading the posts and seeing how everyone trades TTT.

 

Here's my take on TTT:

 

Today (monday 4/6) was short sell day by my calcuations. Taylor says the objective is to sell at, near or slightly above, below yesterday's (Friday 4/3) high of 844.50. Market traded to 848 pretty quickly at the open of the overnight session. This was the clue to look to short at the objective. Nice run down with a decent close in the middle of the range today. For tomorrow's buy day, not sure if market will trade under the objective of today's low-given the nice recovery late today in price. Will watch to see what happens and look to go long tomorrow, per Taylor's rules.

 

It seems like a lot of you don't use the overnight session, but wait for the morning opening. Any thoughts?

[elovemer 10]

....they didn't steal the buy day this time

[elovemer 10]

..... on the possible high made first....

... that cycle inversion may have meant something more ....

 

.... again... next cycle to end is lower cycle.... which ends at the close

....they didn't steal the buy day this time

[elovemer 10]

.... wednesday

.... low made first ... high made last...

[Frank 10]

I wanted to discuss one concept that I think helps 'quantify' Taylor.

 

Taylors concept of 'high made first' and/or 'low made first' is quantifiable. If you think of the daily taylor rhythm in quantifiable terms, it become easier to understand, at least for me.

 

From studying the time of days that the 'made first' occured (low for day if low first, high for day if high first), it turns out that the market makes its high or low for the day 45-50% of the time in the opening 30 minutes. This is a very powerful tendency. If you add in the next 30-min zone (the classic 'opening range'/'initial balance'), then its about 65%. Toss in the next 2 30-min timezones (first 2 hours of day) -- then you capture ~75-80% of the days.

 

Thus, if you 'define' the upcycles and downcycles as movement relative to the opening 2-hour range, you have somewhat re-created taylors system for the intraday market. So look at this past week -- Tuesday made a 'high first' and a 'low last' -- the cycle was therefore down. This cycle does not mechanically 'switch' until a morning high is taken out. Now, price tested the Tuesday low on Wednesday for 'low first' -- and it did so in the opening 2 hours -- then the high was taken out for 'low made first' --- this signals that the market is in an up-cycle until a 'morning low' is violated to the downside. On Thursday the market gapped up and put in its low in the opening 30-minutes, which it will do nearly 50% of the time.

 

I find this to be a very useful framework to stay in the rhythm of the Taylor cycle. The market remains in an up-cycle until a 'morning low' is taken out, at which point the intraday statistics point toward a down-cycle.

 

This framework can be used within a buy day/sell-day/ss-day daily count -- or it can be used on its own. But either way, you know that you are on the side of the statistical tendencies if you use this as a 'mental guide'.

 

Just my 2 cents on making Taylor concepts easier to understand.

[monad 10]

Interesting take, Frank, Perhaps you can follow it up in forthcoming days to better illustrate the concept. Anything that enhances Taylor is worth pursuing.

[Frank 10]

here is a quick glimpse from recent days. the arrows mark (with hindsight) the important high or low that was 'made first'. obviously, in real-time trading you will have to be making a judgment of whether its high or low first and then proceed accordingly -- your judgment might be right or wrong but there are other concepts to help guide you on that -- this is just to demonstrate that an important high or low is 'often' made in the first 2 hours of the day --- with particular emphasis on the first 30 minutes. the first 30-minute bar is very important (as I will show later) in that if a high or low is NOT made in the first 30 minutes, then the odds of a large move away from the previous days close drop in a big way -- and you need to proceed cautiously once price has moved AWAY from the previous close. As you can see on Thursday, the low WAS made in the first 30-minutes and price closed FAR away from the previous close, which is consistent.

 

Note how on March 27th, March 31st, April 3rd, April 7th and April 8th -- price did not make a high or low in the opening 30-minutes and its as if there is gravity of the previous close not allowing price to close TOO far away from the previous close.

 

One other thing -- a key question which is kind of market profile based but fits in here --- is the market showing 'urgency' vs the previous days range early in day (in first 30-minutes)? This is the 'don't get run over' indicator -- ie March 30th and April 1st -- and April 2nd and April 9th to a lesser extent. On these days, market is showing that it has no interest in staying near the previous days high or low. This price action is a strong indicator that something unusual is going on. The point of this comment is just to show importance of the opening 30-minute bar -- not only in its necessity to create a large move vs previous close -- but also interpreting strong action early in day vs the previous high or low as a 'Taylor signal' that an important high or low was just made. (Huge gaps do make this tougher to actually trade in reality).

 

[elovemer 10]

......................

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........................

i wanted to discuss one concept that i think helps 'quantify' taylor.

Edited April 12, 2009 by elovemer

[elovemer 10]

.... this is very interesting....

.... thanks for contributing this perspective....

I wanted to discuss one concept that I think helps 'quantify' Taylor.

[monad 10]

Frank,

In Taylor the emphasis is on whether or not the objective is made FIRST or LAST.

 

i.e on a BUY day, buying objective(LOW) is made FIRST if their is a decline from SS day high to that Low, however if the LOW is made LAST on the BUY day, then that would be Buying objective made LAST.

 

Similarly on say Short Sale Day, ideally the selling objective (HIGH) should be made FIRST for shorting, however if the day ends on the HIGH, then that would mean the Selling objective has been made LAST, one would not short then but wait for the BUY day.

Hope I am not beginning to write or sound like Taylor.

[Frank 10]

Monad,

 

what I am showing is that statistically speaking -- you can/should be actually looking for the 'made first' objective in the first few 30-min bars. Not only this -- but you can quantify how often it begins its move in each period. This is highly complimentary to taylors 'rules'.

 

For example, if you are thinking of 'buy day' the next day --- ideally you would like to get into the 'buy objective' price zone (which is a violation or test of previous days low) during the first few 30-min bars -- because this is the most likely time of day, statistically speaking, for a 'key low' to be made (made first). if price instead 'starts high' and is trading down with momentum in B, the odds may be higher on 'Buy Day/High Made First' -- because this is consistent with the statistical tendencies.

 

again, this is not a 'system' within itself -- its just some added information when trying to come up with your 'overall read' of the situation.

[monad 10]

Frank,

I see what you are getting it, and it would be a good idea to follow up in the days to come, i.e as the market unfolds day by day. That way I guess you get a better grasp of the perspective.

[monad 10]

Frank,

Wonder if you have made a study of failure to penetrate Buying or Selling Objectives, for in Taylor's time they occurred 40% of the time.