Taylor Trading Technique

[WHY? 16]

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.

Dogpile I am not sure why you think that?? That is certainly not Taylor. Everyday is/was either a buy, sell, or short-sell day. The cycle always happens. There are just variations of the cycle. But one cannot say it doesn't happen.

 

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.

Taylor was basically a swing trader. However, his system can be used for daytrading (in a limited sense), swing trading, and trend trading. However, the way it is used in daytrading is that you only try to find the main trend for the day and ride that trend. On the buy day, you might be able to capture two moves, or trends. You are allowed to short and to go long under certain conditions on the buy day. On the sell day under certain conditions you can go long but the sell day is mostly reserved for selling longs aquired on the previous day (buy day). The Short sell day (ss day) is only for selling short. No longs on that day. If one uses charts to trade Taylor (not at all necessary to trade his method) then you use only daily charts. His system is an EOD system. It it appears to me that you are attempting to use Taylors concepts on the many intraday cross currents that take place (judging by your 2 min ES chart you posted). However, Taylor was about catching that one or two main trends of the day. I do not know how Taylor would apply on the many cross currents that can occur within one trading session. However, I can detail the action of 10-11-07 for you. I would need no chart to trade the action on 10-11-07. My proprietary software doesn't even use charts. Lets look at the action on and near 10-11-07

 

We see that 10-11-07 was a BUY day according to my software. On a buy day, per Taylor rules, if the high is made first I am allowed to short it. Then AFTER the high is made IF it trades down and makes its low, and does so early in the session, (by 11:00 or at latest 12:00) then I can go long too. My software gives me 3 probable highs (besides 10-10's high ..so 4 in total) to be potentially made on 10-11-07. I won't get into the calculations of these highs but suffice it to say that they are places that the high "may" occur at. If the low is made after 12:00 then one cannot take a long position simply because it may close weak, or near its low. You don't want to carry a long overnight with a weak close on a buy day if you can help it. Remember, most longs purchased on a buy are held overnight and one would try to sell them the next session of the cycle (sell day). There is one exception to this. If you go long on a buy day before noon and then it heads up fast and hard then sell out on the peak because the next day prices could drop. In such a case you wouldn't want to hold the long overnight. It could continue on up the next day but the odds favor it heading back down after such a forceful rise. So what happened on 10-11?

 

First, on 10-10 -07 my software indicated to me we had been in an uptrend and that the velocity had picked up (check out a chart if you like). Also, we had a high close on 10-10-07. In addition, the previous buy day 10-8-07 made what Taylor terms an HB or higher bottom. That is, the low on 10-8-07 was higher than the low of the previous session. According to Taylor HB's are usually profitable therefore a bit bullish. Also the close on the SS day 10-10-07 was higher than the close on the previous day too 10-09-07 (a sell day). All this indicates strenght. Taking all this into account, I would be looking for a penetration 10-10-07's high on 10-11-07 and I would expect it early in the session. I am armed with my 4 potential high points but the final factor is the tape. That makes the decision for my entry. The market opens on 10-11-07. It immediatley begins trading up. It breaks thru my first high, second high, third high, and fourth high. I have no choice but to wait for the rise to slack off. However, please note the pattern is "right" for shorting a buy day. It traded up early and in Taylors lingo penetrated the high of the previous day (10-10-07 an SS day). Now, note my strategy is to go short because it fits the pattern. Remember, on the close of 10-10-07 I was already anticipating the pattern by the high close, uptrend, and increasing velocity and the other things mentioned above. So, I watch the tape on 10-11-07. It starts to tank out and I short at 1584. It trades on up to 1586 but I am not stopped out. Then the decline begins shortly after 1:00 p.m. and is in full swing by 1:30. It is a steep decline. I know I must cover the same day as Taylors rules require that I do, especially, on such a fast decline. I also know that this is my ONLY play for the day in ES. I CANNOT go long because here we are in the afternoon (it is past 12:00) on a fast decline and most probably will end up with a weak close. So, my long play is scratched. I know this. It has also broken south of all the fib levels, so this is a weak market. I don't want to be caught long in it. Taylors rules don't allow a long postion to be taken here, even though it is down, and one might think it will rise. But to go long in this weak market is dangerous. So, I pay close attention to the tape and try to capture as much of the decline as I can. By 2:30 to just before 3:00 it is trading low enough. I am out of the short at 1559 close to 3:00. I captured 25 pts. That is a big slice out of the days range. Do that on two or three cars and you made some dinero. Why mess around going in/out 10 times that day when what Taylor taught is to catch the main trend? Now, if after I shorted that early high, then it traded down, and made the low, and did all that before noon, I would have covered my short, and went long and would probably hold that long overnight, UNLESS it rallied hard off that low before closing on 10-11-07. If it rallied hard I would sell my long and be flat by the end of the day. IN such a case I would have made two plays that day. A short and a long. If on the other hand, it worked it way back up slowly after I went long, and closed say in the middle of the range on 10-11-07, I would hold that long overnight and try to sell it on the next day 11-12-07 (which is a sell day in the cycle).

 

To sum up: Here is a day that is less than the ideal pattern. Yet some good money was made by sticking to the rules and making this trade the way Taylor would have made it...i.e. capture as much of the main trend of the day that you can. And don't get caught in the many cross currents of the day. Know what you are anticipating. Look for it and correlate that with the actual tape. Always look to capture a goodly slice of the main trend.

 

Remember, the ideal pattern on a buy day is to FIRST trade down, make its low, trade up and close high. One would buy on or near that ideal pattern's low and hold that long overnight to close on shortly after the open on the next day (sell day). In he above case we have a less than ideal pattern that fetched some good money for us by following Taylors rules. To trade Taylor you need need charts (but you can use them if you like). You really just need the rules and know how to apply them in the context of the cycle and the open, high, low, close. I do think Taylor might could be enhanced with an understanding of VSA.

 

Thanks for you explanation of Friday's action. I hope mine helps you to see how Taylor would have probably traded the action on thursday 10-11-07 had he been around.

 

I would not know how to apply Taylor intraday on the many corss currents and I do not know IF it can even be done. That would be in effect saying that the "smart money" is also using mini swing low/swing high cycles intraday that can be understood by applying Taylor concepts to them. I think that would be taking things a bit further than what Taylor intended. His, was, and is, a swing trading system that can be used on a limited daytrading basis and in a 3 day manner. There is also a way to use it for longer term trend trading. But reading the many intraday cycles up and down and applying Taylor to them ...well ..I have my doubts that it would work but it would be interesting to see if it would. Taylors method dealt with price manipulation from a longer time frame than say a 15 minute chart..etc.

[Dogpile 10]

Thanks WHY,

 

My strategy is to scalp a few points a day at high % and then occassionally catch that big move. Having a bias, be it a Taylor bias or any other directional bias, really helps in order to manage the intraday cross-currents. If you are thinking short, you can let the cross-currents set-up your shorts.

 

The best days for me many times are not strong single-direction days but those choppier days that have multiple set-ups. I make money on the dogpile days -- just not a ton. For example, I too did a short trade on 10/11 -- at 84.75. I had a directional bias of short and was looking for 'high made first' after 2 low to high days. We tested up and I was able to enter at a price that showed no adverse after taking my position. The problem was I covered in pieces down to 79.75 --- only to watch it absolutely fall apart to 70.00 - a high-volume zone -- where it congested and then fell apart to 56.00. I would have re-entered short if a quick bear flag had set-up well above 70.00. This often does happen but didn't on this day.

 

I also trade stocks and have more of a multi-day time-horizon than I do on futures. I would like to trade a different account with a higher-timeframe focus, a la Taylor, where I could enter smaller size and play for bigger gains and allow more drawdowns -- I think this would complement my scalping/income strategy quite well. Thus, I would love some more Taylor tips.

 

Let me ask you a few quesitons:

 

1) Can you give just an idea of how your software projects prices to enter at assuming it is a buy day, or sell day or sell short day etc...? I don't need your code, I just want a direction in which to investigate. ie, Taylor talks about the 'spreads between the buying and selling objectives' (pg 76 in Pertinent Points). This is translated as the difference in highs and lows across days. Is this 'spread' used to calculate entries? If so, can you give some guidance on a direction to investigate?

 

2) How long did it take you to make a Taylor 'system' profitable? I assume there were some drawdowns along the way to refining your software.

 

3) Is your 'system' actually all mathematical or is there discretionary oversight by you? ie, can it be back-tested or does it rely on interpretation?

 

thx for any help in advance

[Dogpile 10]

Thanks WHY,

 

My strategy is to scalp a few points a day at high % and then occassionally catch that big move. Having a bias, be it a Taylor bias or any other directional bias, really helps in order to manage the intraday cross-currents. If you are thinking short, you can let the cross-currents set-up your shorts.

 

The best days for me many times are not strong single-direction days but those choppier days that have multiple set-ups. I make money on the dogpile days -- just not a ton. For example, I too did a short trade on 10/11 -- at 84.75. I had a directional bias of short and was looking for 'high made first' after 2 low to high days. We tested up and I was able to enter at a price that showed virtually zero adverse move after taking my position. The problem was I covered in pieces down to 79.75 --- only to watch it absolutely fall apart to 70.00 - a high-volume zone -- where it congested and then fell apart to 56.00. I would have re-entered short if a quick bear flag had set-up well above 70.00 -- and looked to cover into the 70.00 zone. This often does happen but didn't on this day.

 

 

I do also trade stocks and have more of a multi-day time-horizon than I do on futures. But I would like to trade a different futures account with a higher-timeframe focus, a la Taylor, where I could enter smaller size and play for bigger gains and allow more drawdowns -- I think this would complement my scalping/income strategy quite well as I often leave a lot on the table when I am right on the rhythm and would like to correct that. Thus, I would love some more Taylor tips.

 

Let me ask you a few quesitons:

 

1) Can you give just an idea of how your software projects prices to enter at assuming it is a buy day, or sell day or sell short day etc...? I don't need your code, I just want a direction in which to investigate. ie, Taylor talks about the 'spreads between the buying and selling objectives' (pg 76 in Pertinent Points). This is translated as the difference in highs and lows across days. Is this 'spread' used to calculate entries? If so, can you give some guidance on a direction to investigate?

 

2) How long did it take you to make a Taylor 'system' profitable? I assume there were some drawdowns along the way to refining your software.

 

3) Is your 'system' actually all mathematical or is there discretionary oversight by you? ie, can it be back-tested or does it rely on interpretation?

 

thx for any help in advance

[WHY? 16]

Let me ask you a few quesitons:

 

1) Can you give just an idea of how your software projects prices to enter at assuming it is a buy day, or sell day or sell short day etc...? I don't need your code, I just want a direction in which to investigate. ie, Taylor talks about the 'spreads between the buying and selling objectives' (pg 76 in Pertinent Points). This is translated as the difference in highs and lows across days. Is this 'spread' used to calculate entries? If so, can you give some guidance on a direction to investigate?

 

2) How long did it take you to make a Taylor 'system' profitable? I assume there were some drawdowns along the way to refining your software.

 

3) Is your 'system' actually all mathematical or is there discretionary oversight by you? ie, can it be back-tested or does it rely on interpretation?

Please see the attached file for some things you might want to look at measuring. Don't forget to average out those measurements. Throw in some pivot points if you like. Just put two bars side by side and think in terms of pairs: buy day/sell day. Sell day/SSday. SS day/Buy day. Sell day to sell day. Buy day to buy day. SS day to SS day. Buy day to SS day. ...etc. Think of all the combinations. Then think of all the possible measurements. Then average. "Clock" the price. Taylor was a stickler for "on the average". Throw in some fibs. Maybe some of your volume work???? VSA looks promising.

 

My software is a stand alone program. Entry is in the end discretionary. The tape gives the entry points. My software helps anticipate what they might be. But in the end the Tape rules. Price is King and Volume is queen. The code is not TS. I started around 2000 writing the software i.e. having it written. It is EOD. It has been profitable early ..almost from the gate if one follows the rules. Break em and get burn't. I have been thinking of selling it (can I hear a shout ... vendor!!!!I'll probably get banned from here..this is probally my last post when someone screams vendor on the board...that will be fine with me LOL..i don't care ) but just don't know if I want to get involved in the technical support issue plus all the rules and regulations involved with selling such a product. Sec..CFTC..etc. I have trained others to use it. I don't know... just gotta think it over. Maybe one day I'll get up the gumption to make a buck or two on it?? By then some young fellow will come along and program Taylor up real good. I'll be sitting on my front porch in my rocking chair thinking of the "good ole days"!!

 

The system relies on correct interpretation of Taylors rules. The only back testing is to flip back thru the days one by one and see what it predicted and then see what really happened. It shows all that. Gives you a forecast and then a comparison with what actually happened.

 

I have probably said too much here. You might be that young fellow!!

[WHY? 16]

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?

I don't mind at all. It is not a charting method. My software that I developed is not a charting software. I do look at charts some as I am attempting to correlate VSA with Taylor. It may take a bit of getting used to but charts really aren't necessary to be a successful trader. I might get blasted over that one but charting is simply a visual representation of prices. Actually, charts are quite subjective also. One guy sees a triangle and lo and behold another sees something else. However, price is just... that, price. It isnt subjective. It can't be subject to interpretation as to what it is. It is what it is. It is THE price. I think it was Rascke who said "the best indicator of price is price itself. All else are derivatives of price". That comment is pure gold. Patterns on charts are derivatives of price. Most all TA is simply that... derivatives of price. I like things simple. What are prices doing? What are they likely to keep doing? Taylor measured price movement from many different angles. I like to say that he "clocked" price. He believed strongly in averaging. Stocks, for instance, have their manner of trading. Some trade in large daily ranges. Some in more narrow ranges. Some stay in periods of accumulation longer on average than others. You get the picture? Some will produce pretty chart formations. Others won't. But all move in price increments. That price can be measured and quantified and averaged and projected into the future. Oops, I better hush or I will get the "no way to predict" the market people hammering on me. So, I will back up a step and use the term "anticipate" since that doesn't seem to rub people wrong. So, if price is the best indicator of price, and price can be quantified, and price follows a cycle or pattern, or whatever you want to call it, and that pattern or cycle is repeatable, or repetitous then it stands to reason it might could be projected ahead and help one "anticipate" the market. You just have to visualize numbers instead of lines and candles and triangles and head and shoulders...etc. It is like a paradigm shift. We all do it anyway. We watch our speedomotor as numbers. Not a graph. Team score are shown in numbers not charts, usually. However, I will say this about charts. They could be useful to see the "bigger picture" in terms of knowing if the present Taylor 3 day cycle is in accumulation, mark up, distribution, or mark down phases. And they may be useful in correlating VSA with Taylor..something I am working on. Charts are right brain, price is left brain. I would say generally speaking it is good to use both sides of your head! Know what I mean?

 

Is it necessary to be watching the markets in the morning to determine entry? I would say that it is best. However, not absolutely necessary. The biggest problem you might run into is an aberration like a large gap down or up on the open. That could potentially get you in a bad position. I would prefer to at least see the open before I would place my trade. I do like to watch the tape live to determine actual entry points. But, I have, simply placed an order to buy at a price my software gives me once I see that the open is not something wild and woolly. I have left to go do errands..etc and come back to see the order filled. I do like to at least see the open before I place an order. I think Taylor would feel the same way about it. Also, if you use his trend trading method i.e. pick a good trending stock that is a bull and accumulate a line of stock say over several buy days. Then you sell that long stock over several high made first buy days, several sell days, several SS days. You can also do this in a bear market shorting but of course with some things changed up. Once you accumulate a line you may be waiting 3 to 6 months to sell it. It all depends on what price does. However, in trend trading using Taylor method the open wouldnt carry as much weight as when using it for day trading, or swing trading. In trend trading you would be averaging your costs and also you would want to know some fundamentals about the company. I gotta go to bed. It is late. I don't need much sleep but I gotta have some sleep!

[OAC 10]

. Maybe one day I'll get up the gumption to make a buck or two on it?? By then some young fellow will come along and program Taylor up real good. I'll be sitting on my front porch in my rocking chair thinking of the "good ole days"!!

 

The system relies on correct interpretation of Taylors rules. The only back testing is to flip back thru the days one by one and see what it predicted and then see what really happened. It shows all that. Gives you a forecast and then a comparison with what actually happened.

 

I have probably said too much here. You might be that young fellow!!

 

Don't talk like that, Newbies here would think you have the Holy Grail.

[Dogpile 10]

let's go back to recent action.

 

WHY, so 10/11 was clearly a 'Sell Short' Day.

Thus

10/12 = Buy Day

10/15 = Sell Day

10/16 = Sell Short Day

10/17 = Buy Day

 

So we come into 10/17 on a 'buy day'. Taylor would look for a test of the 10/16 low to go long (a violation of previous day low or a higher bottom). Instead we gap up big, setting up possibility of 'high made first'. This is what happens as the violation of previous day low doesn't occur until the afternoon. In this case, what is Taylor looking for in his next trade? Is he waiting for the sell day price action to test the 'buying day low' in the morning session for a trade back up? Or is he waiting for a sell short day (10/19) to short on a test of a recent high? If waiting for the SS Day, which high (10/17, the buy day high or 10/18, the previous day high)?

 

I am confused on this past weeks action on what Taylor was looking for as his 'objectives' were just not met ('objective' is what Taylor uses to describe the zone in which he would like to initiate a trade).

 

I would think that when you go into 10/17 on a clear 'buy day' -- and it then trades 'high to low' -- then that is a sign of a downtrend. But you also mentioned that a violation of the buying day low can be a buy. It never violated the buying day low on Thursday 10/18 so it doesn't matter so much in this example -- so this is just a general question and is why I ask what Taylor does on the 'day after' -- when a buy day ends up trading High first --- or the day after a sell short day when the sell short day trades low first, high last.

 

here is chart of the action. I just can't see any trades that set-up per Taylor recently. Hence, my question.

 

http://bp2.blogger.com/_5h-SWVGx6Ms/RxtVmiyj7iI/AAAAAAAAAeM/qvkfPAhzA4g/s1600-h/10-15+thru+10-19+TS+ScreenShot.png

 

thx in advance

[WHY? 16]

 

WHY, so 10/11 was clearly a 'Sell Short' Day.

Thus

10/12 = Buy Day

10/15 = Sell Day

10/16 = Sell Short Day

10/17 = Buy Day

No, 10-11-07 was a BUY day. Go back and read my post #51

 

So, 10 - 12 = Sell Day

10 - 15 = SS day

10 - 16 = Buy day

10 - 17 = Sell day

 

Taylor can be confusing that I agree on. Just reading his book is confusing.

 

What you thought happened:

Lets say for conversation that 10-17 WAS a BUY. It wasn't, but to answer your question, lets say it was. Taylor would have made a short play and possibly a long play. The gap up would have been the opportunity for shorting, once the tape indicated a slowing down. Taylor allowed shorting on a buy day. He also would allow going long on a buy day. By 12:30 it had dropped enough that had 10-17 been a buy day I would have probably looked at going long after covering my short. I know that is pressing the rules, but with the rather fast steep decline and it still a few hours from the close, I would have taken my chances. I prefer, and Taylor would also to see the long play within the 1 to 2 hours of the open. It is best to never push the rules past 1:00. The odds are greatly against you after this hour.

 

What really happened:

Like I said in my post #51 10-17 was a sell day. You can't go long on a sell day UNLESS a BV is made. You also don't short on a sell day. So, it would have been pushing the outer limits of rules to take the long BV play but a BV did take place by 12:30. One could have entered a long position at around 1538 with a stop loss at 1532 or so (tightest stoploss you would use). It traded lower after that but not enough to take you out of your position. Then it headed back up. On a BV the idea is to sell your long position the SAME day on any penetration of the PREVIOUS day's (10-16) low which was 1545.20. So, on this sell day 10-17 one would have taken the long BV opportunity and shortly been out of the market the same day capturing 7 to 16 pts depending on when you took your exit.

 

 

Hope this explanation helps.

[WHY? 16]

Don't talk like that, Newbies here would think you have the Holy Grail.

LOL most all newbies and a few of us older traders still hunt for the grail. Each generation produces another set of grail hunters. Has yet to be found...must keep searching.

[WHY? 16]

Look guys and any gals that come along on this thread (ever notice you don't see many women traders on trading forums) I do alot of my posting in the wee hours of the morning. Sometimes I am sleepy. I only need 4 to 6 hours sleep a night but I need that much or I am not any good. Anyway, I try to post dates like 10-11-07 ..etc so as to make sure we are looking at the same day. When talking of Taylor one is discussing a buy day, a sell day, and a short sell day. It can get confusing so I try to pin it to a date. But, my software also allows me to rephase or recalculate the cycle if certain aberrations appear in price action. When I run a recalculation it may, or may not, change the cycle. Taylor says to never change it. However, I built this into my software to play around with it. I am saying all this to say: If I make a mistake give me a chance to correct it. I, many times, am posting while sleepy and may have accidently been in the rephased cycle price in my software instead of the pure Taylor cycle price. Plus, I ain't so young anymore and can't think as fast as I used to. But I think BETTER!

 

PS 1) How come you don't see many women traders on these type of forums? (looks like they would make for the best traders since they can multitask head over hills over most men and can run back and forth simultaneouly on both sides of the head i.e right brain/left brain stuff is natural to them. 2) Why do you think Taylor wrote his book the way he did? Did the man actually talk like that?

[WHY? 16]

so this is just a general question and is why I ask what Taylor does on the 'day after' -- when a buy day ends up trading High first

I answered that already in a previous post but you short it and hope to also go long all before noon.

or the day after a sell short day when the sell short day trades low first, high last

You do absolutely nothing. You pass. Why, you wait for the next day (buy day) for a good shorting opportunity. Never go long a short sell day. Why? you might get caught in the wrong trend. You might get lucky and get away with it there there will be a day you get hammered. It could trade down on the SS day, close weak or near the low, and never trade back up. That would indicate a weak market and an upcoming BU on the next day (a buying day) and you are better to go long on that buying day instead of taking the chance on the previous SS day. Maybe a quote from Mr taylor will help clarify. I am putting () in the quote to clarify what he is saying; "Now, we go back to the close of the Short sell day and we find that is was a flat closing, then from this indication we expect a lower opening on the buying day and so far this would cause the low to be made FIRST (on the next day i.e. the buying day) and is a stronger indication when made early in the session (on the buying day) that a rally would start from this low (on the buying day) and hold the gains for a strong closing, which in turn indicates an up opening (on the sell day) and a penetration of the selling day objective- the buy day high" p30. There you have it! Mr Taylors reasons for not going long on a SS day. It could close weak. His reason for not going shorting on an SS day high made last is because it is best to short it on a buy day high made first (next day since the trend is up).

 

Taylor said and I quote "one of the fundamentals of speculation-to be able to protect your capitol and be in a position to act on a more favorable opportunity when it comes along" p63 He also said "Never make a trade unless it favors your play" p11 Another one... "he must not and cannot ignore the prices printed on the tape"... here is a good one..... "you can believe the tape at all times, learn to read it and believe in nothing else for short term trading"...and ..."the real heart reading the tape is to be able to detect concentrated buying and selling and to the determine the trend of the prices"p12 (Dogpile you will like that one). Here is a Taylor quote that cracks me up "The intent has been to keep the method as simple as possible". Now that is funny! On the other hand, it is hard to make something simple. Ask any teacher.

 

How many of you actually have Taylors book and have studied it or are studing it? It is ok to hear what someone else says about Taylor but nothing like going back to the original source. If you have any questions about what he is saying on any particular page I will will happy to give my input. You have to understand his style of talking to be able to catch his "drift". Know what I mean?

[WHY? 16]

I might say this: Taylors system is a comprehensive system that "clocks" price movement itself (without use of indicators) and then determines probable future price (or anticipates...i gotta remember to use this word) based upon those calculations. However, it is my belief that knowing how to read the tape greatly enhances Taylors method. Tape reading is the final thing that determines entry and exit prices. I would recommend reading any books on tape reading. I have long ceased to look at chart patterns. (they make work for some but I can't get it right...I hate candlesticks). Some of the old timers stuff on tape reading such as Gann's The Truth of the Stock Market Tape (hint you can get your public library to probably get it for you), Rollo Tape, Oneils other stuff, Livermores book, Wycoff stuff, and Tom Williams VSA and Clif Drokes Tape reading for the 21st Century. Good ideas on tape reading can be gleaned from these books. Those ideas will enhance Taylor. However, Taylor can be used without such enhancements. I have trained semi-literate people to use Taylor in about 3 weeks using my software. The basics, that is. Enough to get them up and trading. I am talking here about people that have never bought or sold stock and didn't even really know what stocks were. I had to use examples with them like going to the market to buy oranges or tomatoes. And supply/demand in the markets where vegetables are bought and sold daily. Trying to explain shorting to them was fun! I say this to say that you don't have to be highly educated to trade like Taylor. Granted the average person would struggle with his book but his concepts really aren't that complicated. He just words things, in hard to understand ways. It took me quite a while to get my dad to understand how you make money when something goes down in price! Anyway, maybe I ain't supposed to mention peoples books??? I don't know. Forums are different. If I ain't well I guess the mod can delete the post.

[Dogpile 10]

You can't go long on a sell day UNLESS a BV is made. You also don't short on a sell day.

 

On a BV the idea is to sell your long position the SAME day on any penetration of the PREVIOUS day's (10-16) low which was 1545.20. So, on this sell day 10-17 one would have taken the long BV opportunity and shortly been out of the market the same day

 

excellent, thanks.

 

I am clearly having trouble figuring out which day is a buy or sell or sell short day according to Taylor. (This was what Rashke said in her section of the book too). I thought 10/11 was a sure sell short day but you are calling it a 'buy day' -- and it is permissible to short a buy day if you suspect 'high made first'. So I was shorting that day thinking it was a 'sell short day' and you were shorting that day because it was a 'buy day - high made first'. What you name that day really doesn't matter in this case --- we are both shorting on the expectation that the high will be made first.

 

The problem arises on the other days; 'sell day' and 'sell short day' -- since you never go long on a sell short day but I might go long on a sell short day because I actually think the the sell short day is a buy day.

 

at the end of the day, your software is doing something that I am fundamentally missing. Can you outline the most basic rule for what sets up a 'sell short day'? ie, you know for sure it is a 'sell short day' if __________. The only thing that truly matters is which is the sell short day -- because you cannot go long a sell short day, per Taylor. It also matters which is a 'sell day' because you are only to go long on a Violation of the 'Buy Day Low' -- if it is a 'sell day.' It just doesn't matter if its a buy day so much because you can go long or short, per Taylor, depending on if you think the high is going to be made first or not. Thus, the rules for a buy day are not important -- except to the extent that locating the buy day might help you figure out which is the sell day and which is the sell-short day. Thus, this is an open question that I hope you are understanding -- how do you figure out the 'sell short day' -- from high-low calculations? or from counting over from a buy-day + 2 days? or some other way? same question for a 'sell day' -- how do you know for sure that the day that the next trading session is a 'sell day'?

 

This was long-winded but probably more than crystal clear if you interpreted Taylor already (and have therefore proven you can understand some poorly worded material).

[WHY? 16]

excellent, thanks.

 

I am clearly having trouble figuring out which day is a buy or sell or sell short day according to Taylor. (This was what Rashke said in her section of the book too). I thought 10/11 was a sure sell short day but you are calling it a 'buy day' -- and it is permissible to short a buy day if you suspect 'high made first'. So I was shorting that day thinking it was a 'sell short day' and you were shorting that day because it was a 'buy day - high made first'. What you name that day really doesn't matter in this case --- we are both shorting on the expectation that the high will be made first.

 

The problem arises on the other days; 'sell day' and 'sell short day' -- since you never go long on a sell short day but I might go long on a sell short day because I actually think the the sell short day is a buy day.

 

at the end of the day, your software is doing something that I am fundamentally missing. Can you outline the most basic rule for what sets up a 'sell short day'? ie, you know for sure it is a 'sell short day' if __________. The only thing that truly matters is which is the sell short day -- because you cannot go long a sell short day, per Taylor. It also matters which is a 'sell day' because you are only to go long on a Violation of the 'Buy Day Low' -- if it is a 'sell day.' It just doesn't matter if its a buy day so much because you can go long or short, per Taylor, depending on if you think the high is going to be made first or not. Thus, the rules for a buy day are not important -- except to the extent that locating the buy day might help you figure out which is the sell day and which is the sell-short day. Thus, this is an open question that I hope you are understanding -- how do you figure out the 'sell short day' -- from high-low calculations? or from counting over from a buy-day + 2 days? or some other way? same question for a 'sell day' -- how do you know for sure that the day that the next trading session is a 'sell day'?

 

This was long-winded but probably more than crystal clear if you interpreted Taylor already (and have therefore proven you can understand some poorly worded material).

Good perception and some orginal thinking on your part here! However, the rules do matter on the buy day also because "how" it does whatever it does, is important and the rules can help you there. Also, the rules for each day, in themselves, help to anticipate the next day. For instance, never buy a low close on a SS day helps you to anticipate a BU on the next day. Also, buying a BH on a buying day helps you to anticipate bullish prices as being most likely ahead for the next few days because an HB is usually profitable. Buying on a BV helps one to see that the market is weak and may continue that weakness and it may take two ro three sessions before it is back to making penetrations of the buy day high on the sell days and of the sell day highs on the SS days, so you would think in terms of adjusting your strategies to reflect or anticipate the next day. Maybe this makes sense?? Anyway, it all works together. The rules are important for each day. It is not "just" that the price was made first or last but it is also "how" the price was made that helps you to anticipate and what that tells you about the next sessions or next few sessions. Page 15, and page 89 in the book should answer your question. Taylors method was his manner of tracking the markets and staying on the right side of the trend. He developed the rules to help him do this. There may be ways to modify his system without hurting the underlying integrity of it. That is, playing around with the days and seeing what happens. All I know is that Taylors way is as good, if not better, than the other modifications I have seen of his method and as good as my messing around with the days. So, I would say the inventor of the system probably had/has a reason or reasons why he set it up the way he did. We may never know the reason because I guess, or hope, Taylor has gone to the happy trading grounds if he no longer lives. I don't know but I have tried to see if he is still living but have never had any success finding out. If he is he must be laying low or too old to care???

[smoothdrive 10]

Hello WHY?

 

Thank you very much for the post. Man - you are the Man! I play music in an old fart weekend cover band so I haven't had much time to read the book since getting it on Friday, between playing and the wifes "Weekend honey do's". But, I've got some time now.

 

I'm excited about the prospect of reading your posts with a little more understanding. Right now it's sorta like reading a different language. I get a word or two but ...

 

Regarding "Predicting the market" (my quotes) - perhaps I'm missing something here in my newness, but that is exactly what I am attempting to do! I want to pay my dues learning some method of shorter term trading that outperforms short term buy and hold. I want a method that I believe has a much better than 50/50 shot at winning. For me - that is taking what the price is telling me at some point in time, and "Predicting" where I think it's going. Why else would I trade? (I am a self-admitted greenhorn trader and I've never actually entered a short term trade. I have purchased many stocks via my point and figure charts, but they have always been with the intent of a hold that could take some considerable time before they hit my price objectives.)

 

Anyway WHY?, without getting all mushy here - I'm danged indebted to you and thread starter "dogpile" for making me aware of Taylor. You are "Going the extra mile" to help people, and I for one really, really appreciate what you do.

 

Thanks man.

 

Gary

 

 

I don't mind at all. It is not a charting method. My software that I developed is not a charting software. I do look at charts some as I am attempting to correlate VSA with Taylor. It may take a bit of getting used to but charts really aren't necessary to be a successful trader. I might get blasted over that one but charting is simply a visual representation of prices. Actually, charts are quite subjective also. One guy sees a triangle and lo and behold another sees something else. However, price is just... that, price. It isnt subjective. It can't be subject to interpretation as to what it is. It is what it is. It is THE price. I think it was Rascke who said "the best indicator of price is price itself. All else are derivatives of price". That comment is pure gold. Patterns on charts are derivatives of price. Most all TA is simply that... derivatives of price. I like things simple. What are prices doing? What are they likely to keep doing? Taylor measured price movement from many different angles. I like to say that he "clocked" price. He believed strongly in averaging. Stocks, for instance, have their manner of trading. Some trade in large daily ranges. Some in more narrow ranges. Some stay in periods of accumulation longer on average than others. You get the picture? Some will produce pretty chart formations. Others won't. But all move in price increments. That price can be measured and quantified and averaged and projected into the future. Oops, I better hush or I will get the "no way to predict" the market people hammering on me. So, I will back up a step and use the term "anticipate" since that doesn't seem to rub people wrong. So, if price is the best indicator of price, and price can be quantified, and price follows a cycle or pattern, or whatever you want to call it, and that pattern or cycle is repeatable, or repetitous then it stands to reason it might could be projected ahead and help one "anticipate" the market. You just have to visualize numbers instead of lines and candles and triangles and head and shoulders...etc. It is like a paradigm shift. We all do it anyway. We watch our speedomotor as numbers. Not a graph. Team score are shown in numbers not charts, usually. However, I will say this about charts. They could be useful to see the "bigger picture" in terms of knowing if the present Taylor 3 day cycle is in accumulation, mark up, distribution, or mark down phases. And they may be useful in correlating VSA with Taylor..something I am working on. Charts are right brain, price is left brain. I would say generally speaking it is good to use both sides of your head! Know what I mean?

 

Is it necessary to be watching the markets in the morning to determine entry? I would say that it is best. However, not absolutely necessary. The biggest problem you might run into is an aberration like a large gap down or up on the open. That could potentially get you in a bad position. I would prefer to at least see the open before I would place my trade. I do like to watch the tape live to determine actual entry points. But, I have, simply placed an order to buy at a price my software gives me once I see that the open is not something wild and woolly. I have left to go do errands..etc and come back to see the order filled. I do like to at least see the open before I place an order. I think Taylor would feel the same way about it. Also, if you use his trend trading method i.e. pick a good trending stock that is a bull and accumulate a line of stock say over several buy days. Then you sell that long stock over several high made first buy days, several sell days, several SS days. You can also do this in a bear market shorting but of course with some things changed up. Once you accumulate a line you may be waiting 3 to 6 months to sell it. It all depends on what price does. However, in trend trading using Taylor method the open wouldnt carry as much weight as when using it for day trading, or swing trading. In trend trading you would be averaging your costs and also you would want to know some fundamentals about the company. I gotta go to bed. It is late. I don't need much sleep but I gotta have some sleep!

[WHY? 16]

I'm danged indebted to you and thread starter "dogpile" for making me aware of Taylor. You are "Going the extra mile" to help people, and I for one really, really appreciate what you do.

Hey man you are welcome. I thank Dogpile for starting this thread. Not many folks can, or are willing to discuss Taylor. I've been trying to figure him out for years now. Finally, got enough under my belt to get my software up and running around year 2000 but I am still learning Taylor. Sometimes I wonder if the man didn't write like that on purpose. Sometimes, you can read a paragragh and just start laughing because it makes no cotton pickin sense. Sometimes, you feel like throwing the book in the garbage can. Sometimes you think - this guy is crazy! But, somehow I hung onto his book, and went back to reading his book. It is literally the most worn out, marked up book in my trading library. Finally, it started sinking in some. Then, I finally came to grips with the way he writes, and well, that made it alot easier for me. He has his own "language" of writing.

[stackm 10]

I would also like to thank Why and Dogpile for their contributions and hope that this thread continues to grow.

 

I have been keeping a spreadsheet for a couple of months now using the methods outlined in George Angell's "Winning in the Futures Markets". So far it's been somewhat hit or miss. He talks about "rephasing the cycle" when the price momentum indicator changes direction, and pushing the cycle forward a day when the unexpected happens. Unfortunately in September there were many days when the cycle got of out sync. He also advises stepping aside for a few days when this happens until the cycle resumes.

 

I plan to review the concepts in this thread again and also study the Raschke material.

 

I tried to review the Taylor book, but I soon got a migraine so I'll need to revisit that at a later date.

[WHY? 16]

I would also like to thank Why and Dogpile for their contributions and hope that this thread continues to grow.

 

I have been keeping a spreadsheet for a couple of months now using the methods outlined in George Angell's "Winning in the Futures Markets". So far it's been somewhat hit or miss. He talks about "rephasing the cycle" when the price momentum indicator changes direction, and pushing the cycle forward a day when the unexpected happens. Unfortunately in September there were many days when the cycle got of out sync. He also advises stepping aside for a few days when this happens until the cycle resumes.

 

I plan to review the concepts in this thread again and also study the Raschke material.

 

I tried to review the Taylor book, but I soon got a migraine so I'll need to revisit that at a later date.

Nice to have you on the thread! Maybe we can keep it going. Angell did make some contributions to understanding Taylor. But, we have to realize he modified Taylor so you could go long or short on any of the days. Could that be a contributing factor to the "hit and miss"? Or, perhaps you are not combining live tape reading with Taylor? Are you doing this as EOD or trying to capture slices of intraday cross currents? My software allows me to rephase. I wanted the option to do so, thus giving me the opportunity to play around with adjusting the cycle. I don't know for sure that I have seen any real reason to be rephasing except, for perhaps, maybe one. Here is what happens when one advances the day forward or backward one. You rephase and get another day but a few days (maybe the very next day) down the line you rephase and your back to the original setup. It "might" give an edge for the moment on that particular day and allow you to say, go long, when you were looking to short but over the long haul it doesn't seem to make that much difference, at least, that is my current thinking. The market makes aberrations but usually comes back in line again. You could have probably just as well stuck with Taylors plan and used his rules that would deal with the aberrations??? Sooner or later you will be rephasing right back into Taylor again anyway! To sum it up rephasing might help for the moment, and give you an extra trade or two, but sometimes it will also "take" a trade or two from you! For instance, you have a buy day with the opportunity to go long or short. The market makes an aberration, you bump the day forward one and it it seems to get you back into better sync with what is happening but alas now you find you are in sell day and have lost a shorting opportunity of the buy and also perhaps a long opportunity UNLESS a BV is made! On the other hand, it could add a possible trade to your opportunities for the day if say it was a sell day and you bumped back one day to a buy day. Another problem with rephasing is that it also can mess with your thinking and get you confused. You are looking ahead trying to anticipate what the price will do over the next few days and all of a sudden you now got a different three days in front of you. For instance, what was once a HB (higher bottom) on a buy day 2 days ago (and that would have forecast bullish sentiment) now becomes a sell day that doesnt have the same significance, in terms of anticipating the future. So, rephasing not only can take trading opportunities from you it can cloud the past that helps you anticipate the future. So, what am I saying? By all means play around with bumping the days around with whatever calculations you wish to use and perhaps you might discover something that works better than Taylor or Angell or Raschke, but also keep in mind that apparently, Taylor saw no need for rephasing. Correlating volume with rephasing might be a promising area to look at???? Does this make any sense? Again, I would always encourage people to STUDY Taylor over and over. I know it is hard but remember he is the one that came up with the system. Sometimes, I think the dude made it hard to understand, on purpose. Try reading a fairly long paragraph outloud to a friend and tell them beforehand to listen carefully and then tell you the gist of what you have just read! You both will get a laugh out of that!

[WHY? 16]

Remember this: Taylor clocked the "normal" price action or what he would call, "on average". He also clocked the aberrations and averaged them too!

[Dogpile 10]

WHY, if you were to just look at the S&Ps from scratch right now, pretending you haven't looked at them in last month -- can you tell me where you would start and why? and then correlate this back to why 10/11 was a 'buy day' ? or why 10/10 was a sell short day? doing something like this might help me get something that right now, looks pretty much indecipherable.

[stackm 10]

"But, we have to realize he modified Taylor so you could go long or short on any of the days. Could that be a contributing factor to the "hit and miss"? Or, perhaps you are not combining live tape reading with Taylor? Are you doing this as EOD or trying to capture slices of intraday cross currents?"

 

--> When I say hit or miss, I mean that a day I expected to see be a sell short day actually resulted in a buy day, or a buy day dropped the entire day. So far I haven't done intraday changes of day or tape reading. This has just been a research exercise for me so far.

 

So if anyone wants to test their Taylor skills a good exercise may be to map out all of the September days as a buy, sell, or sell short. Perhaps much of the uncertainty about the Fed meeting that month made the cycle harder to predict in advance.

[WHY? 16]

WHY, if you were to just look at the S&Ps from scratch right now, pretending you haven't looked at them in last month -- can you tell me where you would start and why? and then correlate this back to why 10/11 was a 'buy day' ? or why 10/10 was a sell short day? doing something like this might help me get something that right now, looks pretty much indecipherable.

May I ask you where you would start and why?

[WHY? 16]

What do you think dogpile have we bottomed on the S&P? Today is a taylor sell day.

[smoothdrive 10]

Hello WHY?,

 

Recognizing that my trading ignorance would fill silos: When you reference the dates and numbers below, is that the SPX? If so, I get my EOD data from TC2000 - so when I get home tonight, would I be able to look at the SPX and follow along?

 

Any chance you would consider picking an EOD stock or something like the QQQQ or SPY to occasionally discuss?

 

TIA

 

Gary

 

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]

<<What do you think dogpile have we bottomed on the S&P? Today is a taylor sell day.>>

 

lol. happily, I don't have to make that judgment --- I just take the set-ups as they come.

 

<<May I ask you where you would start and why?>>

 

well I was wrong on my count but I will tell you why I thought 10/11 was a day to look to short.

 

Because we had built a ton of volume at 1570 on 10/5. We tested up away from that on 10/9. 10/10 we build a lot more volume at 1570. 1570 had become a 'heavy' point and this price was high in the range. The gap up on 10/11 surprised me somewhat but given the volume profile and the fact that 4 of last 5 days traded 'low first, high last' -- I felt that it could be a bear trap. It was.

 

Taylor-wise, there were 2 low to high days and a violation of the 2nd high -- that is a short set-up in its own right. This was my thinking at the time. I was right on the bear trap and made decent money that day -- though only 5 or so points. This past Friday was a MUCH better day for me. The key to me is to just make money every day and occassionally you make that big win. 10/11 was not my big-win day, 10/19 was... just the way it goes.