Taylor Trading Technique

[OAC 10]

It would be interesting to see how one sees the price action that took place today in the ES within the context of Taylor concepts. I have my view on it as expressed in previous posts I made but now that the day has ended we can reflect upon what happened. Anybody familiar with Taylor want to give it a shot?

 

According to Dogpile:

if you play Pinball, you can come join our daily ES analysis section at: http://www.traderslaboratory.com/forums/6/es-trading-for-10-15-thru-2641-2.html#post22005

If you don't play Pinball, then you have to stay here.

[WHY? 16]

According to Dogpile:

if you play Pinball, you can come join our daily ES analysis section at: http://www.traderslaboratory.com/forums/6/es-trading-for-10-15-thru-2641-2.html#post22005

If you don't play Pinball, then you have to stay here.

LOL funny indeed. Not knocking pinball but I would have no idea where to start.

[WHY? 16]

10-16 was short-sell action all the way except it was short-sell with a failure to penetrate. It never made its target or rather the point I would have looked at shorting at. However, if one is so inclined they could have shorted the failure to penetrate and would have come out ok...this time at least. The weak close on 10-16 indicates further weakness. It remains to be seen if enough support came in to day to stop the decline. According to Taylor tomm 10-17 is a buy day. One has an opportunity to short and to also go long. My first strategy would be to short tomm if shortly after the open the market indicates weakness. However, I would be ready to cover once the decline stops. If the decline is slow and in bits and pieces well.... I wouldn't hold on for much profit but would cover sooner. I wouldn't wait too long because anytime now some strenght could come back in. We have 3 or 4 days down now and the market might start reversing. So, if market looks weak early in the session then I would short on a failure to penetrate. That is, if weak then the shorting target probably wouldn't be thru the high of 10-16. One would have to short before 1562. Cover on any decent decline and look to go long at the same time, or near the same time, especially, if you are able to take a long position below the low of 10-16. Once long if market still looks weak then sell any longs at or near the low of 10-16 i.e. 1545.20 on any rally that you can ride up. However, once long if some strenght starts coming in hold off to sell on 10-18-07

[Dogpile 10]

yah, today is clean buy day. the move is coming overnight however. a vague guess makes me think we could test the high-volume 1570 area today. but resistance around 59.00 also.

 

http://bp3.blogger.com/_5h-SWVGx6Ms/RxYEvCyj7gI/AAAAAAAAAd8/D-O0ngd8VhE/s1600-h/Taylor+Summary+10-9+thru+10-18.png

[WHY? 16]

The opportunity was there to short today early in the session just under 1562. In the 1558 to 1560 area. Then cover around 1553 area and then reverse and go long around 1551 or 1552, already, all, before noon. Since the move up off 1551 is a bit weak I wouldnt hold this long very much unless market conditions change. This is probably a case where I would grab me a few points on the long and get out today instead of waiting to get out on 10-18. On the other hand, if it picks up I would keep my long and look to get on 10-18 especially if it looks like it will close high today. At this moment, the market appears a little weak even though some strenght has come back in. But since the decline has been in bits and pieces best to cover any shorts. Typical Taylor BUY day. High made first that gives a shorting opportunity and then a lower move early in the session that allows one to cover, reverse and a long postion. If not already long I wouldn't go long in the afternnoon as that could carry the risk of a low close. Or it could close up which would be good. However, a low close today indicates more weakness for tomm and a possible BV on 10-18 (Buying day Violation). A BV would be the better play for a long position tomm since the trend is still down. From the market action at this moment I would get out of my long on any little rally that gives me a profit. Unless I see some definite strenght come back in. Should that happen I would keep my long position but as the day progresses, so does the risk. It is a discretionary call.

[WHY? 16]

Getting out was the best call. The slide down continues. Any other longs will probably get stopped out. Best to now stand aside a wait. Already made a violation of yesterdays low. Could make a BV on 10-18 also best to wait and see before taking any more positions.

[Dogpile 10]

Yesterday was Buy Day that played out in overnight session, as noted.

 

Today, I have a -3 Selling count which sets up another buy day. play is to look for a test of the low to go long. we are getting a gap down to test the low. If higher low, have loose 'head & shoulder' bottom -- which is very bullish if that happens.

 

There is a very high-volume zone at 1548.00 -- which makes this tricky. This could be a wall given sooo many contracts traded there.

[WHY? 16]

Dogpile not sure how you determine the days. I come up with different calculations than you do. My software would have indicated to me to sell any longs on any penetration of 1555. Or if shorting - short anywhere near that. The actual number my software produced on 10-17 for 10-18 was 1555.20. At this moment the actual high made was 1555. I still show the market as being weak and at this point of the day it hasn't yet turned the corner and shown any strenght. I would be very careful going long today. If I did I would bail out on any rally that gave me fair to decent profit. Today may well end up a failure to penetrate day. And the general trend is still down. IN such an environment the strategy, as I understand Taylor, would be to short on the buy days on highs made first, and go long on the BV (buying day violations) if made early in the session and sell those long at or near the previous days low. Of course, if the market were to change to strenght then of course ones strategies must then change too. However, at the moment it is weak.

[Dogpile 10]

I don't think I understand Taylor as well as you do -- nor am I as strict about the rules. thx for the insight, very useful to hear how you are interpreting Taylor. You are educating me on a more strict Taylor discipline and I appreciate that.

 

As you can see, there was a buy today on a higher low and a sell into the outlined 48.00 pivot. This morning counter-trend strategy worked perfectly. I actually went long NQ for a trade and made good money getting lucky on exit -- but timing it watching ES move into 1548.00... I should have put a limit order to short ES at 1548.00 with wide stop but I have buy-bias at this point after so much selling over last 3 days.

 

I am thinking of continuing to look long as I am a swing trader and always fading the last big swing, mindful of the key pivots -- and adjusting on the fly as necessary -- with mind on whether we seem to be making high or low 'first'.

 

As of now, I think this is difficult structure with the 1548.00 resistance above, you need to buy well below 1548.00 to give yourself room to make money on long side so you can sell into that zone. But I think the next BIG move could be up rather than down so I don't want to miss that. I will protect myself with good discipline in case the next big move isn't up.

 

What do your calculations project as next downside pivot here?

[WHY? 16]

I don't think I understand Taylor as well as you do -- nor am I as strict about the rules. thx for the insight, very useful to hear how you are interpreting Taylor. You are educating me on a more strict Taylor discipline and I appreciate that.

 

As you can see, there was a buy today on a higher low and a sell into the outlined 48.00 pivot. This morning counter-trend strategy worked perfectly. I actually went long NQ for a trade and made good money getting lucky on exit -- but timing it watching ES move into 1548.00... I should have put a limit order to short ES at 1548.00 with wide stop but I have buy-bias at this point after so much selling over last 3 days.

 

I am thinking of continuing to look long as I am a swing trader and always fading the last big swing, mindful of the key pivots -- and adjusting on the fly as necessary -- with mind on whether we seem to be making high or low 'first'.

 

As of now, I think this is difficult structure with the 1548.00 resistance above, you need to buy well below 1548.00 to give yourself room to make money on long side so you can sell into that zone. But I think the next BIG move could be up rather than down so I don't want to miss that. I will protect myself with good discipline in case the next big move isn't up.

 

What do your calculations project as next downside pivot here?

 

If prices retrace today off the lows intraday today I see the stopping points at aprox 1546 (1st), 1548 (2nd), 1549.50 (3rd). That is, if it retraces to 1st and goes past it I would look at the next level. If it breaks thru 2nd I would look at the 3rd level as the probable stopping point for the day on a retracement. These could act as intraday shorting points if not made too late in the session. I would watch price action around these points and if there is a little trading here and then it goes dull I might would look at putting out a short. If it goes past all three levels then I would recalculate.

 

On the low end. My software kicks out 3 prices to me. 1539.82 (1st), and 1537.50 (2nd) and an average low price of aprox 1553

 

If I wanted an intraday long I would watch price at these first two levels. Again a little trading here then a dull spot I would look to go long. If it sailed on thru 1st I would wait for second. If it blew thru the second I would recalculate my figures for the next stopping points. It is trading below its average low. We can only attempt to anticpate buit we have to trade on the actual action.

 

From a one day time frame my software still show it very bearish in most areas. However, sometimes that shows up when market is getting ready to turn up. So, only time will tell the tale. On a 2 to 7 day time frame it is still bearish in terms of overbought/oversold. However, on the one day time frame (today) at this point it is turning bullish on overbought/oversold. So, while the intraday off the 1542 area is turning a bit bullish for the moment it still shows overall weakness.

[WHY? 16]

The weakness shown yesterday blew out south today on 10-19. Once thing to remember about Taylor system is that in his day they didn't have the pre market hours trading ...etc. I am sure that if they would have had it back then his system would have taken that into account. A shorting of around 1549 a little before the market close yesterday (I picked 1549.50 as one of the intraday highs off the low area of 1542 yesterday) and holding overnight would have paid off well today. If there is any adaptation to Taylor original system I would say it should be in this area. Taylor called yesterday 10-18 a SS day and today 10-19 would be a buy day. On a buy day if high is made first you short it early in the session. Then you look to cover the same day on the decline and reverse and go long IF the low was made say within first 2 hours of the session. Anyway by 10:30 this morning 10-19 one would have been out of their short position in the 1525 area and already reversed for a long position with a stoploss around 1516. A rapid sell off like this once the market opens makes for quick plays.

[WHY? 16]

Well guess I will quit posting here on this thread. Doesn't seem to be too much interest in Taylors concepts. Dogpile has been the main one to show some interest. I am learning VSA to correlate that with what I use, which is Taylor's concepts. I think VSA to be another tool to help anticipate the moves Taylor quantifies.

 

I might say that the price action today 10-19 (buy day) is what Taylor would term a BU (or buying under the low of the previous day 10-18 which was a short sell day). Notice that 10-17 was a sell day and 10-16 a buy day. What is interesting is a BV (buying day violation-a lower low than the precious day which was a buy day) took place on the 17th. THis was in itself a bit of an indication of lower prices to come. I quote from Taylors book (with parenthesis added for application to ES and this week):

 

"The violation (BV of 10-17) is in itself, generally a three day or more decline (we see this three days of decline the 15th, 16th, and 17th), and its seems to require a session or two (18th and 19th) to build up a rally that will (begin) penetrate the tops of the selling days-the Selling (day) and (the) Short Sale day." p48

 

In other words, what he is a saying is that a BV will take another session or two of trading before the price action gets back into the swing of penetrating the high of future buy days on future sale days and the high of sell days on future short sell days.

 

So, the BV on the 17th in itself acted as a sort of anticipation of at least 1 or 2 lower sessions to come. This is pure Taylor. Just another tool to help anticipate.

[Dogpile 10]

thanks WHY? -- there is definitely more I need to learn about taylor and you are definitely helping.

 

you are saying that when the market makes a lower low after a buy day, especially if that low is made AFTER the usual morning 'reversal time', call it the opening 90 mins, then you actually aren't going to get a true buy day until more weakness plays out? You may get an up day, but don't expect the typical up day, up day, sell short day to necessarily play-out. Not sure if that is what you mean but I will read pg 48 and that area this weekend.

 

Historically, I have just thought about it like, start with a Taylor 2-3 day concept and see if action confirms or refutes this thesis. ie, we have seen a lot of down days lately and I thought we might be due for a day that makes a low in the morning and a high in the afternoon. This was wrong -- but price action clearly indicated this was not likely. We had strong range-expansion off opening price to the downside. We also had no visible pivots from any recent time in which to go long. Note my sheet of high-volume zones had no recent price to provide support for a long-scalp. that is, there was no area to 'test' --- a key, key, key Taylor concept -- that of 'testing'.

 

Thus, it made sense not to look for a 'morning reversal' today because there was no area of support. I ended up just waiting and catching a good chunk of the afternoon move down when it was clear that all signs pointed to 'trend day'.

 

I really want to read more Taylor and get to understand more about it --- I will try to add some value by offering up some of my thinking. Hopefully, we can keep this thread going a while longer. Some other Taylor types might start chiming in if we just keep at it a while longer. It is possible although maybe not looking that likely at the moment.

[WHY? 16]

you are saying that when the market makes a lower low after a buy day, especially if that low is made AFTER the usual morning 'reversal time', call it the opening 90 mins, then you actually aren't going to get a true buy day until more weakness plays out? You may get an up day, but don't expect the typical up day, up day, sell short day to necessarily play-out. Not sure if that is what you mean but I will read pg 48 and that area this weekend.

Say day 1 is a buy day. Day 2 is a sell day, Day 3 is a Short sell day.

 

IDEAL PATTERN:

 

The ideal day 1 is to see price trade down early in the session make the low (at this point you take a long position), it reverses and trades up closing on or near the high of the day. That is the ideal setup (for the ideal pattern) for the next day which is day 2. Day 2 it opens making high first and slightly penetrates day 1's high. You sell your longs (you bought on day1) and you are out of the market for the day. It then trades down, then back up, and closes near the high of the day making a good setup for the next day, which is day 3. Day 3 it opens and early in the session trades thru the high of day 2 and this is where you would short it. The selloff comes. You cover on the same day 3.

 

NOT SO IDEAL PATTERN:

 

Day 1 opens up early (giving you a shorting opportunity) it trades down but STAYS down. This is not a good setup for an ideal day 2. As matter of fact, the low close indicates it may make what Taylor calls a BV or buying day violation. If you went long on this low (because it was a day 1 and normally you would look to go long on a day one) it would be best to get out of the position BEFORE the close. Why? Because what is anticipated next is not good for your play. The low close on Day 1 is a setup for a possible BV on the next day which is day 2. A BV (buying day violation is when price violates the low of day one, on a day 2, and does so early in the session. So, lets say price does make a BV. It opens low on day 2 and continues lower than the low of day 1. Once the decline stops your strategy is to THEN go long there, having dumped your other previous longs, because it didn't favor your play. What you have effectively done is repositioned yourself in the market since your first long play on day 1 was a weak play. You then wait for a rally off this BV and then you sell those longs. You do so on any rally back up to the low of the previous day 1. That is, your long selling point now is the low of day one. Why? because a possible decline is now indicated. In an ideal pattern you would have carried your original long made on day 1 over to the next day (day 2) and it would have traded up thru the high of day 1 and that would have been your selling point. But seeing price hang near the low on day 1 and it getting close to closing time, you realize it is going to close low. You know it is not in your favor to be holding longs on a day 1 when the close is gonna be low so you dump them to then re-enter on the BV that will probably be made on day 2 (next day). I hope I am not confusing the issue for folks but Taylor shows the ideal pattern and then also had rules for when the ideal pattern just didn't pan out.

 

Now to answer your question. What you described in your question was a BV. When a BV takes place especially, if trend is turning down or markdown out of distribution is starting then pay close attention to that BV. Just the fact of it being a BV indicates lower prices or a down trend coming. It is indicative of a weak market. Taylor says the market swings high on 3 days (day 1 to day 3). Then comes a decline (swing low) usually made in one or two additonal days. However, sometimes there are variations. In an uptrend it may take 5 days to swing high. IN a downtrend 4 or 5 days too. When you find a BV taking place in a downtrend it is VERY indicative of even more lower prices coming or a LONGER swing low coming. Especially, if it was made in like the first or second day of begining of the downtrend. So, when a BV is made early in a downtrend your strategy must change. The cycle will continue as day 1, day 2, day 3 however, they probably will not be IDEAL (you called it true) Buy, sell, SS days. So, you can anticipate a series of less than ideal days on the horizon coming, because of the BV taking place early in the downtrend. You reason that the downtrend will could last 3 to 5 days more. With Taylor the ideal decline is the high of day 3 (ss day) down to the low of day 1 (buy day). So, this decline or swing low is normally made in 2 days under ideal patterns. But a BV previous to that swing low is indicative that it may be a longer decline. So, day 3 starts after the BV and the decline continues. On the next day in the cycle (day 1) it still continues down. If it closes high the decline has probably been arrested at least temporarily. If it closes low then look for more decline. When you have a series of less than ideal day 1, day 2, and day 3 you get what taylor calls failures to penetrate and BV's. When that happens you must adapt your strategy to market conditions. So, in a downtrend you would be going long on BV's and shorting failures to penetrate on SS days and Buy days. You would forget about going long on buy days because you would get caught in a possible BV the very next day. Taylor always looked to position and re-position himself for a favorable outcome. In short, yes, a BV indicates more "less than ideal" pattern days ahead and alerts you to adapt your strategy. Especially, IF the BV is made at the start of a downtrend. Hope this helps. Taylor is tough to understand, at least the way he writes, makes it hard to follow his train of thought. I have about wore my book out trying to understand the man. I have wondered if he didn't do it on purpose for some reason. I can tell you this he attempted to corner price like no one I have ever seen do. He sought to understand manipulation and to see how it plays out daily in the markets. Todays blast to the downside was engineered that is for sure. We got six days down. I would be looking for the market to head up at least a day or two. Then it might head on down some more from that point. Or, it might head on up. But longs were slaughtered today. Smart money caught every stop loss in sight and hammered on down. Smart money is whistling all the way to the bank.

[smoothdrive 10]

Hello WHY?

 

Hold on please!! I'm hear to tell you there are many lurkers here enjoying your posts. I ordered the book on Monday, and my daughter just called me at work to say fed x delivered a package from amazon. So I'll start the book tonight.

 

I very much appreciate what you have posted here and I look forward to starting the book and kicking around some Q&A if you are so inclined. It sounds like the book is a little difficult to read. So, if you were just starting out with Taylor - how would you go about it? Follow the chapters in order/non-order - read a summary form an outside source etc?

 

Also, I saw that you have posted at the VSA thread -- Do you think the two methods can work in harmony?

 

TIA

 

Gary

 

Well guess I will quit posting here on this thread. Doesn't seem to be too much interest in Taylors concepts. Dogpile has been the main one to show some interest. I am learning VSA to correlate that with what I use, which is Taylor's concepts. I think VSA to be another tool to help anticipate the moves Taylor quantifies.

 

I might say that the price action today 10-19 (buy day) is what Taylor would term a BU (or buying under the low of the previous day 10-18 which was a short sell day). Notice that 10-17 was a sell day and 10-16 a buy day. What is interesting is a BV (buying day violation-a lower low than the precious day which was a buy day) took place on the 17th. THis was in itself a bit of an indication of lower prices to come. I quote from Taylors book (with parenthesis added for application to ES and this week):

 

"The violation (BV of 10-17) is in itself, generally a three day or more decline (we see this three days of decline the 15th, 16th, and 17th), and its seems to require a session or two (18th and 19th) to build up a rally that will (begin) penetrate the tops of the selling days-the Selling (day) and (the) Short Sale day." p48

 

In other words, what he is a saying is that a BV will take another session or two of trading before the price action gets back into the swing of penetrating the high of future buy days on future sale days and the high of sell days on future short sell days.

 

So, the BV on the 17th in itself acted as a sort of anticipation of at least 1 or 2 lower sessions to come. This is pure Taylor. Just another tool to help anticipate.

[WHY? 16]

Hello WHY?

 

Hold on please!! I'm hear to tell you there are many lurkers here enjoying your posts. I ordered the book on Monday, and my daughter just called me at work to say fed x delivered a package from amazon. So I'll start the book tonight.

 

I very much appreciate what you have posted here and I look forward to starting the book and kicking around some Q&A if you are so inclined. It sounds like the book is a little difficult to read. So, if you were just starting out with Taylor - how would you go about it? Follow the chapters in order/non-order - read a summary form an outside source etc?

 

Also, I saw that you have posted at the VSA thread -- Do you think the two methods can work in harmony?

 

TIA

 

Gary

I would read chapters 1 and 2 then chapter 14 Pertinents Points then start back over with chapter 1 and read the whole book. You will have to read it several times. I have been studing Taylor since before the year 2000. My Taylor book is falling apart and is marked up like crazy. But then again, I ain't as smart as some folks! Taylors principles are good and sound in my opinion. His hand written method..well i think that could certainly be improved upon in the days of computers and ..well I have done that for myself.

 

As far as VSA and Taylor. I am learning VSA. I think at this point that VSA could perhaps help to anticipate the patterns that Taylor speaks about and confirm Taylors ideas. I have alot of trading books. If someone held a gun to my head and told me I had to give up all my trading books but one, I would choose to keep Taylors book. If they told me give up Taylors and I could keep all the rest I wouldn't think about it 5 seconds....I would help them load up the other books. I would keep Taylors. But I must admit the man sounds like he rambles along not making much sense until you learn to understand his writing style. You may think the man is crazy or just plain confused but if you can weed your way thru his book, and read it many times, and think about what he says, you will soon get the picture. If you have any doubts on Taylors writing, just ask. I will be keeping an eye out on this thread to see how things are going?? I have read Taylor so much I even catch myself writing like that man! That is bad now!

 

Please understand pages 99-126 (at least in my version of the book) are Raschke and Angells take on Taylor. While they make some good points, and perhaps some useful points, I personally prefer Taylor's way of understanding the cycle. Don't get confused thinking that Angell is explaining Taylors way of doing things because his version is a modified version of Taylor. But if it works for him..good! But it is not what Taylor taught in the strictest sense.

 

Good to hear there are a few lurkers here on this thread. It was looking like dogpile and myself were here alone.

[garp 10]

Totally agree with smoothdrive. Please hold on. That is one of the best and promising threads of TL.

[WHY? 16]

Totally agree with smoothdrive. Please hold on. That is one of the best and promising threads of TL.

OK, will do at least for now. Have a great weekend!

[Dogpile 10]

I wrote some quick easylanguage (Tradestation code) to help visually define whether high or low made first historically.

 

I have annotated the chart a bit.

 

I note that the goal is to start with a thesis and then see how price action works out. Sometimes, you simply won't be able to figure out in real-time where you are in the Taylor Rhythm -- but you can have a roadmap with the 'idealized version' --- and then adjust on the fly as necessary.

 

Personally, I like to just think in terms of concepts:

 

1) When there is a morning test of a previous day low - consider a buy

2) When there is a morning test of a previous day high - consider a short

3) A 'Sell Day' low should not violate the 'Buy Day' low -- a morning low on a sell day may be buyable if it makes a 'higher low' vs the buy day low

 

--------------

 

WHY?, I would love to hear some concepts on how your calculations work. I assume you are comparing highs and lows across days but I would like to here a tip or 2 about how you are doing this.

 

thx in advance,

 

dog

 

I will post my EasyLanguage code when it gets better. Don't have time to finish it right now...

 

http://bp0.blogger.com/_5h-SWVGx6Ms/RxoaQSyj7hI/AAAAAAAAAeE/FbCAy9XtpXA/s1600-h/Taylor+Summary+10-1+thru+10-19.png <---- if thumbnail doesn't work

[WHY? 16]

I note that the goal is to start with a thesis and then see how price action works out. Sometimes, you simply won't be able to figure out in real-time where you are in the Taylor Rhythm -- but you can have a roadmap with the 'idealized version' --- and then adjust on the fly as necessary.

If one trades as Taylor traded then you know what the cycle is before the open. Then you trade by the rules depending on how price action turned out. Trying to adapt the 3 day cycle to actual price action will get one caught on the wrong side of the market.

 

Personally, I like to just think in terms of concepts:

 

1) When there is a morning test of a previous day low - consider a buy

2) When there is a morning test of a previous day high - consider a short

3) A 'Sell Day' low should not violate the 'Buy Day' low -- a morning low on a sell day may be buyable if it makes a 'higher low' vs the buy day low.

Taylors concepts are fine but if you apply them differently then they don't have the same meaning and the 3 day cycle really becomes meaningless. For instance, take number your 3 above. Many times a sell day low WILL violate a buy day low. That is called a BV and it is an opportunity to go long. A morning low on a sell day IS NOT a long opportunity according to Taylor. The higher bottom you speak of must take place on the BUY day. That is, if the BUY day low stays above the previous days low(SS day low), then it is a good opportunity to go long because HB are usually profitable. But this is when they take place on a BUY day. No longs are allowed at all on sell days UNLESS a BV takes place early in the session.

[WHY? 16]

1) When there is a morning test of a previous day low - consider a buy

2) When there is a morning test of a previous day high - consider a short

On these two you would be allowing short or long on any day. This means there is no three day cycle. Taylor would not allow short or longs on just any day. The reason for the cycle is that it is a mechanism for the "smart money" to buy or sell their line profitably and not cause extreme gyrations in the market ALL the time. If one scuttles the three day cycle then Taylors concepts basically have no manipulation context as their environment. The basis of his whole theory is that the markets are manipulated and the cycle reveals that manipulation.

[Reaver 10]

Sorry I don't have more to add...the main thing I got out of the book was an explanation of why price fluctuates. I know that sounds silly and obvious, but it makes a difference when you're buying dips and shorting rallies to know what is going on...I don't personally believe that the systematic pattern presented is for me....I don't believe in any system though. I like the ideas I got from the book...not necessarily the method itself if that makes sense....

[Dogpile 10]

<<On these two you would be allowing short or long on any day. This means there is no three day cycle. >>

 

In my view, there is sometimes a 3-day cycle and sometimes not.

 

WHY?, it would be helpful if you could post some examples of some classic Taylor that is not the standard 3-day cycle -- which is a lot of the time. I just can't imagine ONLY trading Taylor, there wouldn't be very many trades --- but this is where you could enlighten me on a good non-standard Taylor trade that occured recently. This screen capture software is simple to use and it offers a free trial for 30-days:

 

http://www.download.com/SnagIt/3000-2192_4-10717260.html

 

If you could capture some recent action and annotate a real-world example, that would go a long way to helping explain Taylors method.

 

I think I can offer a few trade ideas that may add an extra few points a week for you if we engage here. I am asking you to share some of your expertise publicly in exchange for that by showing some real-world examples of recent action.

 

I think of myself as a hybrid technician. I combine patterns and indicators and 'concepts' into set-ups. I will post a summary of Friday as an example. Maybe you could do something similar -- just pick a day and do it. I find that expaining it here on traderslab.com really imprints it on your own brain -- you gain by doing this kind of homework and you gain when somebody else shows you how they are thinking. I have had very positive experiences here and learned and shared a lot. 'ant' and 'jperl' stand out, to pick a few.

 

Here is how I look at Friday in retrospect. There is no 'Taylor' in this -- I just wanted to show you how I think and then you show me something about how you think.

 

Friday -- you had a 'gap out of range' (gaps above or below the entire daily-range of the previous day). This is a market profile thing. Thursday had a big gap down but the gap was 'within range' of the previous day. Fridays gap 'out of range' is hinting of a potentially dynamic day -- the 'gap within range' does not. This is offering a 'roadmap' which may or not play out -- but its nice to have the roadmap and know what you are on the lookout for to confirm this. You then had 'open-drive' -- a high conviction directional move off the opening price -- this again is a Market Profile concept and is confirming the bearish roadmap. This down move also comes after a 'narrow inside day' -- which is a standard breakout set-up. After the 'drive' lower -- you then later had a 'test' of the VWAP price --- which coincided with a '15-min First Cross Sell' -- this is a pattern recognition/indicator thing from Linda Rashke, which is my absolute favorite set-up for big moves. I also noted some bear flags that showed up. I find the 'first flag' after a strong inital thrust away from VWAP to be a very nice reward-risk set-up. When you enter the last hour and down-volume is swamping up-volume as it was on Friday -- you have the potential for accelerated selling into the close. Rashke calls this set-up 'last call' -- its a 'trend day' set-up where there is often a strong move that kicks in around 3:15pm on a true trend day.

[smoothdrive 10]

Hello WHY?

 

Thank you for the very informative post. Per your suggestion, I just read the first two chapters and the Pertinent Points chapter. I can say that perhaps -yes perhaps, I understood about 5% of the material. : ) Whow! I guess if it was easy, everyone would be doing it.

 

It's encouraging to know that the Taylor book/method is your top pick. That says a lot to this noobe. A question or two if you don't mind.

 

a) The first chapter references that fact that it is a BOOK method, and "It is not a charting system". I hope it can be a charting method becuase I'm a visual person. Do you use charts?

 

b) There were references to action in the morning. My problem is my job will not allow me to do much trading during the day. I'll have to do all my analysis in the evenings and place my orders accordingly. So - do you think one can use the Taylor methods with end of day data only? Or, is it necessary to be observing the markets in the morning to determine entries?

 

TIA

 

Gary

 

 

 

 

I would read chapters 1 and 2 then chapter 14 Pertinents Points then start back over with chapter 1 and read the whole book. You will have to read it several times. I have been studing Taylor since before the year 2000. My Taylor book is falling apart and is marked up like crazy. But then again, I ain't as smart as some folks! Taylors principles are good and sound in my opinion. His hand written method..well i think that could certainly be improved upon in the days of computers and ..well I have done that for myself.

 

As far as VSA and Taylor. I am learning VSA. I think at this point that VSA could perhaps help to anticipate the patterns that Taylor speaks about and confirm Taylors ideas. I have alot of trading books. If someone held a gun to my head and told me I had to give up all my trading books but one, I would choose to keep Taylors book. If they told me give up Taylors and I could keep all the rest I wouldn't think about it 5 seconds....I would help them load up the other books. I would keep Taylors. But I must admit the man sounds like he rambles along not making much sense until you learn to understand his writing style. You may think the man is crazy or just plain confused but if you can weed your way thru his book, and read it many times, and think about what he says, you will soon get the picture. If you have any doubts on Taylors writing, just ask. I will be keeping an eye out on this thread to see how things are going?? I have read Taylor so much I even catch myself writing like that man! That is bad now!

 

Please understand pages 99-126 (at least in my version of the book) are Raschke and Angells take on Taylor. While they make some good points, and perhaps some useful points, I personally prefer Taylor's way of understanding the cycle. Don't get confused thinking that Angell is explaining Taylors way of doing things because his version is a modified version of Taylor. But if it works for him..good! But it is not what Taylor taught in the strictest sense.

 

Good to hear there are a few lurkers here on this thread. It was looking like dogpile and myself were here alone.

[Dogpile 10]

Back to Taylor,

 

After running my simple 'High or Low First' Indicator on Tradestation (EasyLanguage) -- and of course its obvious with 20/20 hindsight but look at this:

 

I first presented the 'Idealized Pinball Buy' at the beginning of this thread. The pattern was 3 up days and a down day leads to a Pinball buy.

 

An 'Idealized Pinball Sell' is the reverse of thisl. 3 down days and an up day leads to a pinball sell. See last 4 days of this past week.

 

just FYI.