Taylor Trading Technique

[monad 10]

WHY?

As per 305(richbois) post, 6th Jan 2009 was a Sell Day, which would lead to 8th Jan Thur being a Buy Day, 9th Jan Friday as a Sell Day and yesterday Monday 12th Jan as a SS day.

 

I have attached a SP CASH chart for 8th Jan-12th Jan, Buy Day, Sell Day and SS day.

Here it is the reverse of the situation of what you have just explained. The Low of SS day being lower than the Low of Sell day.

Could you comment on these 3 days.

 

Also today in this sequence (could be different as per your calculations) Today would be a Buy Day. Now the various scenarios described under Buy Day, this would fall in category (b)

i.e Low being made last on a SS day, hence look for low made first on a Buy day within first 2hrs to go long. Am I on the right track.

[WHY? 16]

WHY?

As per 305(richbois) post, 6th Jan 2009 was a Sell Day, which would lead to 8th Jan Thur being a Buy Day, 9th Jan Friday as a Sell Day and yesterday Monday 12th Jan as a SS day......

 

I have attached a SP CASH chart for 8th Jan-12th Jan, Buy Day, Sell Day and SS day.

Here it is the reverse of the situation of what you have just explained. The Low of SS day being lower than the Low of Sell day.

Could you comment on these 3 days.

 

Also today in this sequence (could be different as per your calculations) Today would be a Buy Day. Now the various scenarios described under Buy Day, this would fall in category (b)

i.e Low being made last on a SS day, hence look for low made first on a Buy day within first 2hrs to go long. Am I on the right track.

 

Monad,

 

First, I am not sure just how Rich calculates the cycle but following his calculation here are my comments.

 

jan 8 - I would have probably grabbed the 8 to 12 point opportunity that presented itself early in the session simply because I am a believer in taking any decent profit the market gives me. However, per Taylor if I would have desired I could have held all day and sold the next day close to the open and I would have grabbed a few more points.

 

Jan 9th - Sell day according to Rich and you..Early in the session a BV was made. Since it is a sell day my only opportunity to take a position (as per Taylor) is to take a long position on a BV. No short-selling is to be done on a sell day. So, I would have entered long early in the session near the bottom of the BV (tape reading would determine my entry) and I would have exited on the first rally back up thru the previous days low (which would have been around the 898 area). If the intraday tape indicated to me that the rally off the BV would be continuing up, I might would have held longer and captured more by selling out near the close. Taylor says when on a selling day the when the high is made first and penetrates the previous days high and sells off closing low (thus creating a BV) then th indications are for a lower opening on the next day i.e. the SS day.

 

Jan 12th - SS day per Rich according to you...This a a case of a failure to penetrate. Normally, this is a risky trade to go short on (you can understand more about this type of senario on page 48 of his book). Generally, it is best to "pass trading" on this sort of action. However, if you don't mind taking more risk then early in the session on the first rally back off that quick decline (that took place right after the opening) IF the rally stops (and it did...see second paragraph) then you are allowed to put out a short sale providing the trading range at the top of this rally narrows down and makes few transactions. It did this, so, if you were so inclined you could place your short sell at this point but I would watch it closely. Any decline of any consequence that starts would be my covering point and by all means be flat at the end of the day.

 

Jan 13 - buy day according to Rich and you. Yes, I would watch for an early decline and watch the tape and once it appears to stop I would look at going long. However, since we are in a decline IF no rally of any consequence is forthcoming, after taking my long position, I would grab whatever profits the market gives me. On the other hand if the rally back up is strong I would hold for more points but be ready to jump ship. If, it opens and trades up immediatley and penetrates the previous days high (SS day) then you have a shorting opportunity. So,depending on how the markets play out today you could go long (odds favor at least some sort of decline first). If so, one could go long then on any rally back up sell the long. Then, IF within first hour or two it trades up one could short it once it gets tanks at the top, after selling out the long position. If, after the open it trades up and penetrates the precious days high then the tactic is to short it near the top (tape reading again for entry). And then on any decline cover the short and after that IF still within first hour or two one could possibly look at reversing and taking a long postion.

 

The point is that there are 2 possible opportunities that present themselves today. Short and long. Either order depending on what the market does within the first 2 hours. Odds favor some sort of early decline then some rally but I have some doubts as to how much rally. To me it appears there will be some sort of decline early creating a long position then a rally back and IF that rally proves out to be weak..narrow range...tanking...there is a possible shorting opportunity. I say this because the bigger picture indicates we are in a decline. And the low close yesterday indicates weakness still in the market I would expect a lower low to be made today than yesterday. Again, the tactics taken depend on the actual market action of the day within the framework of the 3 day cycle and Taylors rules for employing the tactics for each day of the cycle. Again Taylor is discretionary trading within a framework of 3 day cycle and specific rules to follow for each day of the cycle. When daytrading his method the goal is to capture "small but sure" profits. That is, to get at least a fair portion of the days move without getting whipsawed around. Once must be content with a slice of the profit and forget about what the market does after one exits. I gotta run as I some things to do...we will see how the day turns out.

 

PS... I am in no way suggesting or advising anyone to follow what I comment on here. These comments are simply informational and my opinion. Nothing more. It is NOT specific trading advice.

Edited January 13, 2009 by WHY?

[monad 10]

So far the scenarios have played out well WHY?

 

Attached: Cash chart and also that of Globex plus Day session (ESmini futures)

 

The market dipped below SS day's low before rallying, providing the long opportunity and then hit resistance around 873 affording a shorting opportunity.

[richbois 10]

To answer how I got on the cycle I have.

 

I started my trading book on ES last year at the end of January and used as per Taylor the last 10 days and found the lowest low that being Jan 22, 2008.

 

rest is history.

 

 

Today when I start a new book I use a different method then that prescribe by Taylor but it often results in the same cycle.

 

My method today is that I take as much data as I want (usualy 6 months) and try the 3 possible scenarios with the 1st day of data. The cycle that will give me the highest ratio of Positive 3 Day Rally is the one I choose.

 

If I was to start a new ES book today I would end up on the same cycle and since I have over 100 instruments to follow and new ones to create every so often, I found that this method has worked the best for me.

[Shamal 11]

Monad, richbois, WHY?

 

Today based on all your analysis would make it a sell day, the markets are selling off big time. Anybody care to elaborate.

[monad 10]

Monad, richbois, WHY?

 

Today based on all your analysis would make it a sell day, the markets are selling off big time. Anybody care to elaborate.

 

As WHY? pointed out in one of the posts, in a bear market or a strong downtrend, expect BUY DAY VIOLATIONS and caution on any long trades which need to be exited quickly , the rallies are short lived which will be indicated by tape reading or price/vol, i.e less vol, narrow range bars etc.

Today is a classic example.

 

Anyway WHY? may have more to say on this.

[monad 10]

Also if a low was made before lunch on a Sell day, which has just happened, a long can be taken but once again not held too long.

 

[Shamal 11]

Thanks monad for the info.

 

the main price moves did turn out that way. there is obviously lot going for this methodology. I posed this question in the chatroom today, not many takers in there, they claim they trade mainly market profile, price/vol,

Dbphoenix who is very much Wyckoff man, is doubtful if there are any cycles in the market at all.

Overall it appears most shun away from Taylor, wonder why? from the posts on this thread especially those of WHY?, there appears to be logic.

[DbPhoenix 42]

Dbphoenix who is very much Wyckoff man, is doubtful if there are any cycles in the market at all.

 

I wouldn't go that far. It just doesn't have anything to do with my trading.

 

Whatever works.

[monad 10]

That does not automatically mean that these cycles as per Taylor do not exist in the market.

I was skeptical myself at first, had the book for a few years now, have made attempts to read and then given up many times, finally decided to have a real go, that effort together with the various posts here made me realise there is much more to this method than meets the eye.

However am not surpirsed that most would want to throw in the towel for it is not easy reading at all, you just have to read the reviews on Amazon.com. Those who have persisted have seen the light of the day and consider it priceless, those who haven't announce it is obsolete and irrelevant.

As WHY? has explained in detail, understanding Taylor method allows you to have strategies in place for the trading day, then one has to employ tactics via tape reading, price/volume etc to implement the strategies for each specific day. This way the trader has a specific plan for the day with the trading rules laid out by Taylor and not end up shooting from the hip.

[WHY? 16]

Also if a low was made before lunch on a Sell day, which has just happened, a long can be taken but once again not held too long.

 

This BV made before noon gave one the opportunity to go long, grab a few points, and get out before the days close. In a break to the downside like this you do not try to sell your long you just bought at the previous days low (buy day) but you would sell on any rally back TOWARDS the buy day low that gives you a profit. Odds are the rally would not make it back to the buy day low. This is an extreme example of how you go long in a selloff and make money using taylors rules.

 

Now if you were trading the 3 day method and took a long postion yesterday on 1-13-09 holding it overnight what would have happened right after the open today?

[DaKine 10]

All traders out there need to check their fingers.

 

http://news.yahoo.com/s/ap/20090113/ap_on_sc/sci_financial_finger

 

Yes! my ring finger is longer! I'm rich b**ch!

[monad 10]

WHY?

 

getting back to my post 313, would appreciate if you could spare some time to add/modify etc, for I am really beginning to understand Taylor now, thanks to you. You have dealt with the Buy day.

 

2. SELL DAY: Again both long and short trading possible.

 

a) High made last on Buy day: Look to short on penetration of this high or failure to penetrate.

b) Low made last on Buy day: look for long opportunity at open , however if prices drop below the low then that is B.V and hence the long should not he held too long, target would be around the low of buy day. Next level would be the High of Buy Day if uptrend continues. Many times the prices rise even further and a High is put in last on Sell day.

c) If flat close on Buy Day, again, wait for tests of the low of the buy day before considering long.

 

3. SS DAY: According to Taylor strictly no longs on this trade, however if I understand you guys correctly, both longs and shorts can be considered depending on previous days action.

 

a) High made Last on Sell Day: Look to short on penetration or failure to penetrate.

b) Low made Last on Sell Day: Note if B.V has occurred, then longs can be taken with similar target as that on sell day.

c) Flat close on Sell Day: both longs and shorts possible on open??????

[BlowFish 10]

snip

 

Overall it appears most shun away from Taylor, wonder why? from the posts on this thread especially those of WHY?, there appears to be logic.

 

I think because his original work was not particularly well written (so I hear) and this seems to result in confusion in the reader more often than not. I don't know whether the principles are straightforward and unambiguous once deciphered, I have bought his book but haven't read it yet. Actually this thread might well spur me on to get round to it!

 

To me a method that introduces a timing component is of interest as a complementary approach to price based work.

 

I wonder can Taylors work be broken down in to a reasonably concise set of principles?

[HAKUNA 10]

why not give it a shot Blowfish, yes it is not an easy read, effort and persistence required as Monad says.

 

surpised at Db's remarks on "Whatever works", am sure read somewhere on his forum

"Nothing works by itself , you have to make it work". Just because it does not fit his style of trading does not mean it has no value to another trader.

 

Read the book, then put your questions to richbois and WHY? for clarification, the way the response has been from these guys so far, you will begin to see merit in this method. From what I have learnt, you have to completely ignore Linda Raschke and G. Angell's version.

[BlowFish 10]

I certainly plan to, actually now would be a good time with a couple of experts on hand As was noted it seems to not be a widely followed technique, so a good opportunity. I have to be in the mood for deciphering maybe this weekend.

[monad 10]

I certainly plan to, actually now would be a good time with a couple of experts on hand As was noted it seems to not be a widely followed technique, so a good opportunity. I have to be in the mood for deciphering maybe this weekend.

 

It is not widely followed because it is not about signals or latest hype, it is creating a book as richbois and WHY? have outlined, then setting about identifying the cycles and then working out strategies for each day in advance. The strategies are then implemented via tactics determined by tape reading i.e intraday price action depending on whether a high or low is made first and when.

The primary confusion as you will see if you read this thread from beginning is regards the terminology Buy Day, Sell Day and SS day. You could use day 1, 2 and 3 if you wish (refer to the book). This means you could be shorting on a buy day and going long on a sell day. This confuses most people and they give up as there is a tendency to read todays action, brand that as a buy or sell or ss day and then fit it into the cycle. That will as WHY? has pointed out will not work. But once you put in the hard work you will be pleasantly surprised.

[WHY? 16]

WHY?

 

getting back to my post 313, would appreciate if you could spare some time to add/modify etc, for I am really beginning to understand Taylor now, thanks to you. You have dealt with the Buy day.

 

I am extremely busy the next few days but will post as I am able and will deal the other 2 days.

[WHY? 16]

Now if you were trading the 3 day method and took a long postion on the S&P emini march yesterday on 1-13-09 holding it overnight what would have happened right after the open today?

I was wondering if any of you out there reading Taylors book and IF you were using what Taylor called his daily method of trading (not the 3 day method mentioned above...that was an error on my part that should read daily method of trading) what do you think would have happened if you went long on the on 1-13-09 (buy day), held overnight (allowed in Taylors daily method of trading) and then sell off came the next day 1-14? Have any of you been able to extract from his book his rules about what would have happened to you in such a senario IF you followed his rules? The lesson is pretty important. Look at pages 35, 37 and 38 of his book.

 

In addition, what about today 1-15-09 according to the "count"we have been taking it would be an SS day. A day for shorting however, it was failure to penetrate the high of the sell day. Failures to penetrate can be read on pages 47 and 48.

 

BTY we should see something of a rally on 1-16-09 in the S&P. I would say we should see a bit of recovery from this decline.

Edited January 16, 2009 by WHY?

[HAKUNA 10]

WHY?

 

I have the e-book, and the pages you refer to do not match, would appreciate if you point out the chapter.

 

Anyway from what I have learnt, 13th (Buy Day) followed 2 days of B.V ie. 9th a Sell day and 12th a SS day.

Hence the market is weak. There was opportunity to short early and then late afternoon, to go long. However the price behavior suggested that the rally is not going to last long. As I am strictly intraday, there was no choice but to exit with whatever profit the market gave.

If the long had been held overnight well....................time to bang the head against the table/ the computer or kick the dog:) as it is against the rules laid out by taylor.

 

As for yesterday 15th a SS day, yes it was failure to penetrate, early opportunity to short on early rallies which fizzled out at the top, double bottoms put in before lunch and during lunch, ideal longs, once again would not hold it overnight, price action dictated exit around 3p.m EST when the bonds closed.

[elovemer 10]

... I am so glad this thread is still going so i can learn ....

... bickering comes and goes... but the good stuff stays.... thanks everyone....

 

.... here is a chart which shows the last lower cycle.... and how close the low came to the end of the cycle.....

[monad 10]

I was wondering if any of you out there reading Taylors book and IF you were using what Taylor called his daily method of trading (not the 3 day method mentioned above...that was an error on my part that should read daily method of trading) what do you think would have happened if you went long on the on 1-13-09 (buy day), held overnight (allowed in Taylors daily method of trading) and then sell off came the next day 1-14? Have any of you been able to extract from his book his rules about what would have happened to you in such a senario IF you followed his rules? The lesson is pretty important. Look at pages 35, 37 and 38 of his book.

 

In addition, what about today 1-15-09 according to the "count"we have been taking it would be an SS day. A day for shorting however, it was failure to penetrate the high of the sell day. Failures to penetrate can be read on pages 47 and 48.

 

BTY we should see something of a rally on 1-16-09 in the S&P. I would say we should see a bit of recovery from this decline.

 

1. Taylor instructs that " a flat or weak close on a Buy day indicates that short interest is no hurry to cover and hence B.V is expected", hence any longs taken should be exited on the same day.

 

2. Moreover "flat or weak closes usually occur in downtrending market. hence all the rules are in place to close out the long position.

 

3. As you say and Hakuna also spotted 15th provided the opportunity to short on early rallies on small time frame where the tanking process you described could be clearly observed. The prices on ES declined rapidly to ~815 (approx buying objective) , where longs were in order(10.40ESt), the rally then faced resistance from previous swing low around 825, still 10pts in it for the long trade.

 

4. Then the decline led to another low during lunch and as Hakuna pointed out, formed sort of double bottom which was much clearer on the Nasdaq along with the price/vol action. Not stictly Taylor who advocated long before lunch but tape reading indicated such an action then, hence a long opportunity was there, again to be exited by the end of the day as the downtrend is still in place and the close on this SS day is just above the open. On candlestick charts it is ideal hammer indicates buying pressure is winning.

 

5. Today 16th is a Buy Day, as we are starting from a downtrend, if the market opens high, it can be shorted but not held too long as shallow retracement can be expected. Then it is a question of watching the highs to see if there is consistent failure to penetrate.

Edited January 16, 2009 by monad

[HAKUNA 10]

Well as per Taylor, on a buy day, the gap up provided a short, almost 10pt move

Presently looks as if a low will be put in during lunch, lets see how it pans out.

[richbois 10]

I my way of looking at Taylor, Yesterday 1/15 had an 85% chance of gettting back to the Buy day low of 857 (Globex Session). After reaching the projected lows, It gave it a go but didnt reach it during the normal session. It reached it overnight and when we opened today we had a gap up above the SS day high and knowing that we need a Decline and that occurs 95%+ of the time, short was the only option, at least until a decent decline is in.

[HAKUNA 10]

I my way of looking at Taylor, Yesterday 1/15 had an 85% chance of gettting back to the Buy day low of 857 (Globex Session). After reaching the projected lows, It gave it a go but didnt reach it during the normal session. It reached it overnight and when we opened today we had a gap up above the SS day high and knowing that we need a Decline and that occurs 95%+ of the time, short was the only option, at least until a decent decline is in.

 

That would be consisent with your discovery of the Positive 3 Day Rally, Great short setup today and the bounce I expected during lunch from the support level around 830 put in late yesterday on ES. which incidentally is also a 62%fib level of low of yesterday to high of today.