Taylor Trading Technique

[richbois 10]

This is an old thread, but just checking to see if anybody is still using Taylor and keeping track of buy days/sell days, etc? I've been working my way through the Taylor Trading Technique, which I must say is no easy read, but offers some valuable concepts. I am less interested in mechanically counting 3 day cycles than trying to figure out how to use the Taylor concepts at bit more flexibly to anticipate likely buy/sell/short sale days. Is anybody else incorporating buy/sell/SS day strategies into their trading?

 

I have been trading the TTT method for a while now and have develloped my own way of doing that. I made my own books for stocks and for indexes futures, and pushed the Taylor's method to the 21st century. Taylor created this method but when you read his book in between the line you will find that he forgot to write lots of things.

 

Also when you read Taylor you will notice that a Buy day is not always for buying and the same goes for the other days

[Bearbull 10]

I have been trading the TTT method for a while now and have develloped my own way of doing that. I made my own books for stocks and for indexes futures, and pushed the Taylor's method to the 21st century. Taylor created this method but when you read his book in between the line you will find that he forgot to write lots of things.

 

Also when you read Taylor you will notice that a Buy day is not always for buying and the same goes for the other days

 

Perhaps you could illustrate the methodology over the next couple of weeks as dogpile did some time back. I am sure there will many here who would take interest.

[gio 10]

Perhaps you could illustrate the methodology over the next couple of weeks as dogpile did some time back. I am sure there will many here who would take interest.

 

hello bearbull

 

if i may chime in

 

what rich's ttt does is give you the same equation that dogpile presented plus the other side of the equation that is missing

 

for instance, on a sell day, if you had no buy day low violation to go long what bias would you now have? and, where would you expect price to go if that happened - not to mention the possibilities, in prcentage, what those expectations would be

 

 

regards,

gio

[richbois 10]

Perhaps you could illustrate the methodology over the next couple of weeks as dogpile did some time back. I am sure there will many here who would take interest.

 

I didn't read all the posts on this thread, however from the ones I read, Dogpile by his own admission is not trading the pure Taylor. "WHY" has a very good grasp of the concept. I believe I am on the pure side also.

 

I have created my books like Taylor explains, however added much more to it. Having done these additions, which are realy all based on what Taylor mentions in his book but not in his TRADING BOOK, I have discovered some very interesting facts.

 

There is a 3 DAY cycle, and there is ways to trade them.

 

Taylor explains it all in his book and it is just a matter learning how to trade each facets. B,S,SS days and then High or Low made first or last, all come in to play. Today we have computers to make things easier, Taylor didn't, and with that we can calculate levels and odds of where the cycle will take each instrument on a given day. I call my books E-Books for Electronic Books

 

Knowing in advance what to expect, and having a framework of where the market is going to encounter support and resistance, makes it easier to trade on the right side.

 

I have discovered that we get POSITIVE 3 DAY cycle even in bear markets.

 

Look at the last 9 months, all indexes have dropped about 25%, however and we have had better than 85% Positive 3 Day cycles. That ratio is even higher in some stocks, as high as 95+%.

 

All that is important when you want to trade the pure Taylor Method.

[Frank 10]

I wrote this a few months back as a summary. While some of my thoughts have evolved since then, I think this has some pretty valid points to consider which summarize some concepts from Taylors Trading Technique book:

 

TAYLOR/MARKET PROFILE HYBRID - VERSION 1.1 (MAR 2008)

 

Summary:

The Taylor Trading Technique is a method to trade the inherently choppy nature of the futures market. It is easiest to understand Taylor ‘structure’ by first agreeing to view the market as Taylor did, one that is being driven by large ‘smart-money’ manipulators. You can choose to change the reason for WHY the cycle exists if you wish, but I find it’s best to first believe in it as Taylor did as his technique then becomes quite logical as to why you are doing what you are doing each day. Later, you can choose to believe that it is simply the ‘nature of free markets’ that causes a Taylor-like 3-5 day cycle to exist. But for now --- go with it --- big-money manipulators are behind it.

 

Taylors core premise was that the market was not only manipulated, it was manipulated in repetitious ‘stages’. That is, there are different lengths to the stages (ie a 3, 4 or 5-day cycle) --- but the structure is that of 1) a buying cycle and 2) a selling cycle. These stages repeat over and over again in a few different ways that can be categorized. Another thing to realize is that Taylor quantified the market. He kept a detailed ‘book’ which measured the moves. Each day had a name and Taylor would specifically quantify the length from the ‘buying day low’ to the ‘sell day high’. The decline for Taylor was from the ‘short sell high’ to the ‘buying day low.’ But rather than go into all of the ‘book method’ specific calculation, I want to stick with the higher-level concepts and importantly, how they relate to other technical concepts. Taylor believed that one could interpret what the big manipulators were doing by watching highs and lows across days.

 

Key ‘Smart-Money’ Manipulator Strategy:

Force a ‘violation’ of the previous day low in order to create panic and then buy cheap stock

Force a ‘penetration’ of the previous day high in order to unload and/or short overvalued stock

 

That is it. Essentially, ALL of Taylors ‘plays’ center around positioning and re-positioning himself to benefit from this manipulator strategy. For example, Taylor would watch the closing action closely to set up the next day ‘play.’ If it looked like the market was going to close low in its range (low made last), Taylor would know that the ‘next-day’ strategy of large manipulators would be to push the market down further, below the low (low violation) and flush out the weak – where cheap stock could then be purchased. Therefore, Taylor would always be watching to see if ‘high made last’ or ‘low made last’ – his terminology for anticipating the closing action. All of his plays are about positioning (and re-positioning if necessary) himself to stay synchronized to the current manipulator buying/selling cycle.

 

After studying the core Taylor concepts more closely, you will see that the technique is closely related to many other technical trading concepts. It’s a lot of the same concepts but thought about in an anticipatory way. By categorizing the structure of the market into a particular grouping, you are then positioned with a plan as to how the movement may unfold. Interestingly, the main concepts of Taylor mirror the concepts taught in Market Profile. Taylor avoided the noise of the intraday market and patiently waited for his core ‘play’. The location of where his play sets up is exactly consistent with Market Profiles focus on ‘trade location’. The concepts in market profile are an excellent way to add context to the Taylor buy/sell day rhythm. Since Taylor did many calculations to augment his method, and since I am not presenting those calculations, I find that the market profile concepts are an excellent way to fill in this gap.

 

Summary of 'Concepts': Best to think in concepts rather than rigid Taylor rules.

 

Discussion of Concepts (note the interaction with Market Profile):

From Jim Daltons book ('Markets In Profile'): “The end of an auction offers the moment of greatest opportunity… risk & return are asymmetric at this point.”

 

This is exactly what Taylor did, located the end of one auction and the beginning of another. When you are right, the rewards are large as you are entering at the beginning of a new multi-day move.

 

Dalton: “Excess marks the end of one auction and the beginning of another.” Again, this is exactly what Taylor did with his focus on the ‘violation’ of the previous day high or low.

 

So these are the assumptions:

1. The greatest reward-risk opportunity is when one auction ends and a new one begins

2. Auctions end with ‘excess’

 

Thus, the ideal location for entry is precisely on the price bar that completes an ‘excess low’ or an ‘excess high.’ Now, how to determine when an ‘excess low’ or ‘excess high’ is in place and therefore one auction has ended and a new one is to begin?

 

Jim Dalton summarizes this well; ‘excess’ can be seen in 1 of 2 ways – a tail or a gap. But note how the ‘tail’ (buying or selling tail) is really the same concept as the ‘violation’.

 

Concept 1: The ‘Violation’ (Taylors version of a ‘Tail’)

A violation is the tendency of the market to exceed the previous days high or low. It does this on the vast majority of days (in 2007, the market did this on nearly 9 out of 10 trading days). Effectively, the market carries residual momentum from the previous day and it spills into the next day and results in a ‘violation’. This was when Taylor watched closely. Sometimes, the residual momentum will be very strong and carry price far above the previous day high. Other times, the market will hit resistance and this violation will form a ‘selling tail’ and price will retreat back into the prior days range. Dalton would call this ‘returning to value’ after attempting to auction away from it. Thus, as Taylor practitioners, you watch price action relative to that previous day high or low and then look to fade it as your core entry. (By the way, Dalton also often uses this previous day high or low as his ‘reference point’ in his newsletter – Taylor understood Market Profile inherently before Market Profile was invented!).

 

If the market closes high in its range, the high of that day becomes the key ‘reference point’ for the next day. If the market closes low in its daily range, that days low becomes the key ‘reference point’ for the next day. In general, a move that violates (exceeds) that days ‘reference point’ (the previous day high or low) can either be ‘accepted’ or ‘rejected’ by the market.

 

Taylor called the fine-tuning of entries as ‘watching the tape.’ The real-time way to monitor this ‘acceptance/rejection’ tape-reading is not the focus here. But clearly, watching volume, oscillators, ticks and market internals are the modern ways to do this. If you have strong volume, then you likely have ‘auction continuation.’ If you see a nice oscillator pattern (ie First Cross or a good 3200t divergence), these are forms of fine-tuning the entry in a market with much more range than Taylor ever had. Back to price acceptance vs rejection. If price is ‘rejected’ after violating the reference point pivot (the high or low), you have ‘auction reversal’. This rejection is the ideal Taylor entry as you have big reward when right and you have some decent odds on your side if you can be patient enough to wait for the right spots.

 

Concept 1A: ‘Before The Violation’ – The Power Play

If the violation signals a potential ‘excess high’, then what about the period of time before the violation has occurred? Since Taylor wrote the book in the 1950’s, the markets have clearly changed a bit. The 24-hour nature of modern electronic futures markets has created a new ‘Taylor-like’ trade.

 

As stated, if the market closes strongly, you would expect the market to exceed the previous day high the next day. Thus, if the market closes strongly and the nighttime session takes price down off that high, you have a potential ‘power buy.’ (Power buy is a LBR name for a trade that enters on a retracement with assumption that there is still residual momentum about to re-establish itself once the counter-trend correction completes). Taylor didn’t do this because he would generally hold overnight and sell the next day on the violation. Nevertheless, the ‘power play’ is very consistent with the expectation of how smart-money manipulators move the market around.

 

As you can see, the power play trade will not be consistent with the name of that particular day. For example, a 'power buy' will generally occur on a ‘Sell Day’ – that is, the day AFTER a Taylor ‘Buy Day’. The buy day with a strong close indicates a new directional auction up. The day after the buy day carries residual momentum into the sell day. Therefore, the first good play will very often be to buy and play the residual momentum up (often entering before regular market hours). This may be confusing at first, but remember that you are expecting a ‘high violation’ – and a long on a Sell Day that has not yet violated previous day high is a very good play.

 

If the market gaps up overnight, then there is no power buy play. Taylor would generally be long from the buy day and sell-out of the long into the Sell Day violation of the Buy Day high. Thus, if trading the 'power buy' rather than holding overnight -- you give up the overnight gaps up but you do gain in 2 ways. First, you won’t get caught in gaps down. Second, you will improve your profit by buying back in on the power buy rather than riding this frequent overnight correction out.

 

Similarly, after a weak close with some good volume-based selling, an overnight move up sets up a ‘Power Sell Day’. Despite the next day often being a ‘buy day’, the first trade is often to short and play for the violation. Taylor called this ‘Buy Day, High Made First’. Once the violation has occurred, you now must be careful of shorting since you now might be shorting right into a ‘buying tail’ (where manipulators might be buying cheap stock). Depending on the prevailing conditions, the play will now often be to go long and play for a ‘Buy Day/Low Violation’ in anticipation of 'High Made Last' ('Low Made First').

 

Concept 1B: The Gap (Market Profile)

The second form of ‘excess’ after the violation/tail is that of a gap. (note this is not Taylor here -- this is Market Profile -- Taylor acknowledged this type of gap -- but stayed away from trading it). Dalton: “A gap at the end of an auction that occurs in the direction opposite the most recent trend signals a reorganization of beliefs. Market participants have changed their perception of value so dramatically that they simply begin trading at a completely different price level.”

 

Thus, a gap can also confirm that an ‘excess high’ was just achieved. And we know that the moment at or just after an excess high is the location of greatest return/risk. A ‘gap down’ will obviously not be a ‘high violation’ but the ‘excess gap’ from Market Profile concept is very consistent with Taylors concept in Chapter 10 ‘Failure To Penetrate.’

 

Gaps are trickier because your core expectation is that the market will exceed the previous high or low. If price gaps in the other direction, you might be tempted to still play for that previous objective. And you might be right in doing so. There are many gaps that are simply shakeouts that set up good power-buys. Did afternoon players overdo it and push price up too high and are now trapped? Or is there still residual momentum left-over from these same volume-players? We know that there is a tendency that the market will often trade back into a gap. However, when it doesn’t, you have an unfilled gap and many traders who went with the close expecting continuation are now badly trapped and will be unwinding, adding fuel to the fire. So what do you do? This is where ‘low to high’/’high to low’ counting can help. If you just had a good ‘buy day’ after a multi-day down move, you can be more confident that you have a power buy rather than a gap & go the other way. If you have had two consecutive up days and then a gap down, now odds are higher of auction reversal. Three consecutive up days and a gap down, odds are higher still on reversal.

 

Auction Reversals and the 15-min 'First Cross' trade (enter Holy Moley)

After 2 up days and a gap down, you are deciding whether you will buy and play for a power buy (play for the more common high-violation/selling-tail) or whether you should ‘go with’ the gap-down on what is likely a 'sell-short day'. The gap down means there was not a high violation and therefore large manipulators haven't yet forced price up enough to unload their stock. Shorting may be tough in this spot. Going long might be the better play – realizing that you may be playing with fire here after 2 up days and a gap down.

 

But what if you see some pretty strong downside volume? Well, you can try to ‘go-with’ this on the short-side. Look for a Russell ‘short-skirt’ near the open and play the momentum. An alternate method is to simply wait. You can watch how strong the down momentum is and decide if it is for real. The reason for waiting is simply to avoid trading in many days that simply peter-out after some initial whippy action. By waiting for the 15-min First-Cross sell, you can filter all those other days out and only enter on days that have demonstrated strong volume-based moves. This will be signaled if the gap remains unfilled and therefore an auction-reversal has taken place. You should also have strong selling pressure (good downside volume). Ideally, you may also get an ABC-up pattern after the hard morning move down --- which sets up the ‘holy moley’ short trade – 15-min FC Sell in the 3/10 oscillator combined with 'ABC-up' on day 1 of a volume-based new directional auction.

 

One other good rule of thumb regarding ‘Auction Reversal Gaps’. If after an UP auction the market makes such a gap as to gap down through the previous days Opening Price --- and holds price well in the morning session -- then don’t even think of trading against that ‘shocking’ gap. This is a difficult structure to trade, however. For this reason, one way is to wait for the eventual 15-min First Cross trade (watch volume and see if the gap remains unfilled – you will have time to digest this as the 15-min trade will take a while to set-up).

 

Concept 2: The Inside Day

Given the importance placed on highs and lows as key reference levels by Taylor, what happens when there is no ‘violation’ of previous day high and no violation of previous day low --- ie, the 10-15% of days that are ‘inside days’? The answer is simple and straightforward – ‘go-with’ the next days initial momentum away from the inside day (ignore any existing Taylor count). The day following an inside day will start a new ‘Taylor count’ and will serve as day 1 of a potential 2-day move (one strong day and another day that ‘violates day 1).

 

Concept 3: Residual Momentum (High or Low Made Last)

This concept is really just a point about how important the afternoon price-action is into the close. Big money institutions generally save a good deal of their buying and selling into the afternoon session (I used to be an institutional PM and I discussed this many times with other PM's at other large institutions). Performance for institutions is calculated using end of day pricing. If you are a money manager, the last thing you want to do is bid XYZ stock up with your buying all day only to have you complete your purchase too early and have the security drop like a stone once you are done. This is the worst of all worlds for your performance, you paid up for it intraday and it closes low relative to your cost-basis. Don’t underestimate this factor. Tomorrow will always be unknown for the Portfolio Manager (the stock could go either way in the morning) but performance TODAY will be posted using the 4pm closing price – and performance TOMORROW will again use that 4pm closing price. Price might do anything up until 4pm tomorrow, but the point is that it is the collective action of institutions that are in control at this time of day. For the futures, I like to watch how price closes relative to the volume-weighted price (VWAP) for that day.

 

Concept 4: Key Reference Point

This is simply a point about how to interpret price action. It is much easier to understand the underlying forces at work if you have a level in mind. It keeps you honest from fighting the tape too much. 3 possible reference points help me personally. 1) the previous day high 2) the previous day low and 3) the days most heavily traded price. What is the market doing relative to these 3 prices? Learning to interpret action relative to key reference points makes trading much more structured.

 

Concept 5: Market Profile

I find market profile to be a very nice complement to Taylors structure. Concepts from Jim Daltons ‘Markets In Profile’ book such as ‘attempted direction,’ volume-based rejections following ‘excess,’ ‘profile shape,’ ‘balance,’ ‘auction reversal’ etc… --- these are all excellent ways to augment the variations in the Taylor-rhythm. Remember, Taylor had many, many detailed calculations that were key to his ‘book method’ that I did not go into here. I find that Market Profile will fill in much of this gap that is left from not performing these calculations. The technical patterns will always have noise and attempt to shake you out – but the underlying ‘structure’ of the market is residing in the key concepts of ‘market-driven’ information (what Market Profile is all about).

 

Some Feedback Notes:

A long-time Taylor practitioner gave me one piece of feedback since I wrote my first Taylor summary. She mentioned that she thought one of the most important concepts in the book was about how Taylor would hold overnight for follow-thru the next day. I have discussed the night-session ‘power play’ here. This is really the same force/concept at work implemented slightly differently. Both ideas are that the residual momentum off a strong close will play into a violation the next day. Thus, they are consistent but it should be noted that I did not stress this point while Taylor very much did --- he generally played for the 'continuation gap' in the direction of the close --- although he did mention that if the gain on the trade was large going into the close that locking-in that gain is worth considering.

 

To some extent, we live in a different world than Taylor. His examples in his book often showed markets with very little range to trade. Today, we routinely get 20+ pt range days in the S&P futures and can trade nearly 24 hours a day. It is up to the reader to figure out entries around the core concepts -- but it should be noted that the overnight continuation is a powerful concept.

 

I will leave it at this - very often, the market will do something that leaves you without a ‘Taylor entry.’ For Taylor, who liked to enter in the first few morning hours, the most common ‘trade-miss’ is when there is an afternoon reversal after a ‘violation.’ Here is the time to consider using the overnight power play to initiate an entry as you may very well have missed the entry due to the time of day that the reversal occured.

 

Description of Various Classifications of Days:

 

 

The ‘Buy Day’ (typically follows multiple high to low days)

 

A categorization of buy days is more useful than the blanket ‘Buy Day.’ There are 3 primary buy days:

1. Buy Day with Low Violation – Look Long -

2. Buy Day with Good Gap Up – Look Long -

3. *Power Sell Day – Look Short (Same as ‘Buy Day, High Made First’ – no ‘Low Violation’ yet)

 

A ‘Buy Day/L.V.’ is exactly that, a potential buy AFTER a downswing in the market culminating in a violation of the previous day low. This extension below the low is a ‘test’ to see if the market wants to continue down or simply needs to go a little lower so that savvy buyers can relieve weak longs of their positions. A Taylor follower will wait for this violation of the low and then look to go long.

 

The ‘Sell Day’ The Sell Day categorization is the most misleading name of all. It should really be discontinued but since it is a well-known term, we will simply sub-divide it like we did the buy day.

 

1. Sell Day with High Violation = Standard Sell Day/Expect ‘Range Day’-- Sell Buy Day Longs and/or any Power Buy Long you took overnight

 

2. Sell Day with Low Violation = This implies a violation of the low made on a ‘Buy Day’ – called ‘Buying Day Low Violation.’ You still look long but you now keep profit target conservative and look to exit a long on a test of the ‘Buying Day Low’ --- thus you must only buy on a deep move below the ‘Buying Day Low’.

 

3. *Power Buy Day – Look Long (Follows a Buy Day – but there has been no High Violation yet’)

 

The Sell Day follows a buy day. Sell Day/High Violation Once the market has used up its residual momentum from the previous days strong afternoon session close by violating the high of the previous day, this was Taylors spot to sell – hence the name, ‘Sell Day.’ Resistance will now often come in and you can look to short the market. But what is your objective for the trade if you short? You can’t play for the previous day low – that is a long way off and is an unlikely (but occasional) occurrence. If the market shoots FAR above the previous day high (most likely through a large gap up) then the objective for a short becomes the previous day HIGH. If the market finds resistance not far above the previous day high then you will look for a trade back towards an EMA (exponential moving average). The logical EMA is the 15-min EMA – though you should not be seeking a large return on this trade – just get in, get your profit and get out.

 

General Guidelines: when stock is cheap (as measured relative to previous day low), he liked to buy. When stock is expensive (as measured relative to previous day high), he liked to sell or sell-short. Except in the case of the ‘higher bottom’ --- Taylor did not generally trade when price was inside the previous days range. (note, this play is often the beneficiary of a short-squeeze – for it to set-up, the market will have violated lows on multiple consecutive days, you do not always have to take this play of course, but it is nice to know the ‘Taylor play’ – as it may keep you from shorting into a location that often gets short-squeezes).

 

The Sell-Short Day

1. Sell Short Day with High Violation – Look Short

2. Sell Short Day with Good Gap Down – Look Short

 

Sell Short Day with High Violation – pretty straightforward. Short above the previous day high and hold for a good move down. No going long on a sell-short day. Sell Short Day with Good Gap Down – this is not a Taylor play. This is a market profile play. Taylor would leave this kind of day alone. Beware of shorting into an ABC-down power-buy. This is where waiting for the 15-min FC sell comes in if the day has shown strong selling pressure and is indicating it could be dynamic down day. Otherwise, you will often get narrow and or inside days in this spot as the little bit of residual upside momentum from the last two days leaves a bid under the market and you have not trapped enough longs like you would on a ‘high violation’. If gap goes unfilled – it is still worth a shot.

[Bearbull 10]

Great Effort Frank, at elucidating the concepts of TTT, LBR employs them very effectively in her trading. I believe dogpile has also elaborated on them in many of his excellent posts. you could perhaps follow this up with trading examples in the following weeks, am sure it would be of considerable interest to many here.

[Frank 10]

ok, I am away from my main computer but here is an example from this week.

 

Note the important, crucial concept from Taylor -- watching price action relative to the previous days high or low, whichever came last. is price being rejected (market profile 'tail') or accepted once it attempts to leave the range of the previous day?

 

[richbois 10]

Frank, this has to be the best explanation of Taylor I have read.

 

Thank you

 

Richard

[Bearbull 10]

ok, I am away from my main computer but here is an example from this week.

 

Note the important, crucial concept from Taylor -- watching price action relative to the previous days high or low, whichever came last. is price being rejected (market profile 'tail') or accepted once it attempts to leave the range of the previous day?

 

 

Thanks for that, have attached some charts, would appreciate if you could identify similar TT setups, at your convenience ofcourse.

[Frank 10]

is that an ETF? the chart structure is messy but at least partly readable.

 

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

 

Edited August 10, 2008 by Frank

[Bearbull 10]

Thanks Frank, Dogpile also was not a pure Taylor trader, believe WHY? according to his posts was a staunch TTT guy,

The attached charts were Dax 60min, the price action is much clearer on smaller time frames and when prices move in this market, they really move. As you outlined in your detailed post above, entry can be gained via vol. divergence , oscillator divergence , patterns or wyckoff price/vol, at optimum levels and in this respect, believe some of the concepts of Taylor could be provide that extra edge.

Perhaps you could address the other 3 in a similar fashion, would be interested in your analysis.

[Frank 10]

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

Edited August 10, 2008 by Frank

[Bearbull 10]

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

 

I like Dax as there are no problems regarding liquidity and the European markets do influence what happens in US and vice versa, have an interesting article on that, if you wish I can PM it to you.

Anyway back to business in hand, have attached 2 charts of ES 45min, from July 15th. Would appreciate your take on those via TTT.

[Frank 10]

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

 

[elovemer 10]

....my Taylor technique is a work in progress....

....so basically... i use what Taylor wrote... as simply as possible.... with his rules as guidelines for what to watch out for.....as far as "first" and "last"

....the problem with applying his approach... is that we are not him....

....anyway.... if you look at my book....

... you notice "LOST" and "FOUND"

....the meaning is... a day is lost if there is a buy day... and the next day is a sell day... for example....with no (day 2) coming in between...

... later ... the lost day reappears as a found day....

....the result is....when you get a found day... the cycle extends beyond 3 days... and when you lose a day... the cycle is cut short to 2 days

... at this point... the 3 day cycle goes back to normal....

... the question is.... how does one account for the LOST and FOUND days... ?

.... what i do is.... i use a geometric shape to measure the cycle length of the highs and lows on the 30min globex chart....

....for the highs... make a rectangle which graphically measures the length of the high to the next high....

.... you might get 2 or three or these before the cycle length changes...

....and the same thing for the lows....

....just put your highs rectangles up top...

... and your lows rectangles down bottom...

 

...now.... how to make use of them rectangles ?

.... well.... if you get a swing high which comes in early....i.e. ... not at the end of the cycle.... then you start to suspect that the low will be extended and that it will start moving fast... to make it before the end of the cycle....

.... if the low does not come in .... then expect an even higher high to come in

.... and vice versa... if the low comes in early on its respective cycle....expect that the high will be extended ....

....and if the high does not come in .... you can expect an even lower low to come in.....

 

..... these changes in cycle.... represent the change in the swing wave direction..... and cause the 3 day method to go out of whack temporarily....

.... so the first pic... is my book

.... the 2nd pic is the 30 min cycles...

.... on the 30min chart... you can see that the 3rd cycle high came in early.... and this caused the next low to be extended....which threw the 3 day method out of whack....lost a day....

 

.... on the 3 day... i use buy... then day 2... then sell..... otherwise it is out off whack... or out of cycle... until it comes back in....

...edit.... the cycles shown here represent the reason the method went from a buy1 day to a sell2 day the very next day..... this happened earlier in the book once before... but i did not post the cycles for that one... it worked the same

...edit... also i would like to say something about Taylor's book...

.... the dang book is amazing because he accounts for almost all situations....

... the bad part is .... he draws from here and there in mid paragraph... mid sentence...very disjointed...

... would not be a bad idea to just rewrite it chapter by chapter.... using clear sentence structure...

....in addition.... the print is hard to read... another reason for rewriting it and posting it here....

... work in progress.... thanks for making this thread....dedicated to Taylor

Edited September 6, 2008 by elovemer
chaangge

[elovemer 10]

....is this thread dead already ?

... if so... let's revive it....

[Bearbull 10]

....is this thread dead already ?

... if so... let's revive it....

 

Well folks come in now and then , put up some great explanations and then vanish, would be fruitful if we can continue on a daily basis and observe how the TT method pans out. I know Linda Raschke employs it very effectively, have tried to slog through Taylors book but it is almost unreadable;)

Dogpile and WHY? both have made very useful contributions in this regard but once again have not heard from either for sometime now. Perhaps you can keep it alive. via whichever market you trade.

[elovemer 10]

....great.... :0)

....well....the only tricky part seems to be explaining why the 3 days goes out of whack... when it skips a day or adds a day....

.... my method is to watch for when the 30min cycles come in early....

....i will try to post more later.... for now.... here is the next update to my book

... this is for the ES futures...

...with today Wednesday being the buy day.... where thursday would be day 2... and friday would be the sell day....

...today was perfect buy day action.... a slow incline in premarket... then a drop to just below yesterday's low for the buy... this low occurred at 8.00am which is not accounted for in the book because it only includes real time prices

.... i will be travelling for about one week... so i won't be able to post during that time...have to get a new visa

...edit... btw... i might just have to edit the Taylor book myself and post it... it would be a good exercise and could help others....as his book is truly great... just poorly written and disorganized

Perhaps you can keep it alive. via whichever market you trade.

Edited September 10, 2008 by elovemer
change

[Bearbull 10]

Yes as per your previous explanation, the initial trade to the short side would be the Powersell, followed by violation of the low for the subsequent Buy setup.

 

Well lets see how Thursday and Friday pans out.

It would be great if you could edit Taylors book and make it readable:)

[Bearbull 10]

elovemer,

 

I was kind of in a rush re. previous post, the powersell concept was actually elaborated upon by Frank in post 205.

 

He also explained Gap plays - very good info.

 

I guess he would explain todays price action on ESmini, on that basis, price had been drifting premarket from 1235 to ~1212, creating a huge gap in the Day session.

 

Wonder what is your take on that.

[elovemer 10]

...bearbull,

... i am sorry i have been on the road.... and have not had time to dig in yet...

....but here is a shot of the cycles on that last run....

....where the bottom cycle came in early.... and caused the top cycle to end fast and strong....

....obviously... the drawback to using this method to gauge days lost/gained is that seeing the cycle is a subjective process....

... or should i say "placing" the cycle....

elovemer,

I was kind of in a rush re..

[Nine 10]

Trying to understand the Momentum Pinball oscillator more - it's a 3 period RSI on a one period rate of change. What would this look like expressed as plain math? Wilder's RSI is this:

 

RSI = 100 – [100/1 +RS]

RS = Average of n periods closes up/Average of n periods closes down.

 

 

Would Momentum Pinball be this?

 

RSI = 100 – [100/1 +ROC]

ROC 3 period = [(Today's close - Yesterday's close) + (Yesterday's close - Close 2 days ago) + (Close 2 days ago - Close 3 days ago)]/3

[sevensa 10]

Trying to understand the Momentum Pinball oscillator more - it's a 3 period RSI on a one period rate of change. What would this look like expressed as plain math?

 

ROC(RSI(Close,3),1)

[Nine 10]

Thanks! Still a bit confused though - how exactly is the RSI of the ROC calculated. The ROC is calcluated with today's close minus yesterday's close but how is the RSI of this calculated? I want to the the StockFetcher.com screener and it doesn't allow ROC(RSI(Close,3),1) in it's language - I'll need to break it down into simple math.

[sevensa 10]

I misread your original explanation of the indicator. The formula actually is:

 

RSI(ROC(Close,1),3)

 

Instead of using the closing price for the input to the RSI, you use the ROC value.