The Original Taylor Trading Technique Book Method

[richbois 10]

Hi Fellow Traders,

Thales asked if I would start a thread on the Taylor Trading Technique here at TL where those interested in incorporating the Taylor Method into their trading could share their experiences, ask questions, and learn from each other.

In the interest of full disclosure, all should be aware that I do offer a service based on TTT. Basically Taylor showed us how to start our trading book for an instrument, I took his method, added a few of my own refinements, and offer a nightly spreadsheet based on that information. However, this thread is not meant to be a solicitation for my service, nor is to be limited to those who subscribe. This thread is open to any and all traders either already use Taylor's Book Method, or those interested in learning more about the method. All are welcome here. I merely wish to help those interested in Taylor, and discussing the way Taylor should be used.

One thing is of utmost importance - Thales and Rigel have mentioned in other places here at TL that most traders who try and fail to succeed with Taylor do so because the trader makes continued attempts to "re-phase" or "shift" the cycle to "fit" current price action. I want to make clear that according to Taylor, the cycle does not shift, and therefore, we want to keep the discussion based upon the cycle as you or I have in our trading book, and we do not want the thread to turn into a debate about changing the day of the cycle. We can all have a different day and find a way to trade it profitably. That's right, we can have two different trader's trading the same instrument using Taylor, and yet each may be on a different day of the cycle. The reason this can be is that Taylor, in the end, is based upon following the market as it cycles from a trading cycle low to trading cycle high, so the focus is always on recent daily highs and lows. There is another thread here at TL on Taylor where people debated the shifting of cycles. If you subscribe to the notion that Taylor's Method is better when a shifting cycle approach is applied, then may I politely ask you to refrain from posting here, and instead participate in the other TTT thread.

 

So lets use this thread to discuss Taylor as Taylor himself understood his Trading Technique.

[richbois 10]

For those who follow the GBPUSD, here is a good example on how to trade a Buy Day.

 

GBPUSD had closed near the highs on Friday. We know that a Buy day means that we will get a decline from the SS day high. Market oppen and tried twice to get above the Previous Day High and Failed. That was the entry point to short.

 

At this point we need to worry about taking profits. As we can see on the attached chart TTT MA Decl, which is the average decline on Buy Day for the last 20 cycles, was at 1.5039, and the Previous Day Low at 1.5022. This would the place where the longs would do battle and the trade should normally end.

 

Now that we know that the Buy Day Low could be also in, Long positions could also be taken.

 

This was a good example of how we can go short on Buy Days and also where a long position could be taken at the BDL.

[DugDug 10]

Hi Rich, as a new person to looking at TTT (recently downloaded and tried to read and understand it ), and while I dont want to confuse matters, are the names - buy days and sell days, and short sell days - confusing? ie; a buy day is a good day to short....

 

Do you think for ease of trying to get the head around it, I called it just day 1,2,3 in the cycle. Whilst still understanding the actual process? Or do you think it would actually cause me to miss something in the ideas. (I dont want to shift the cycles )

(kindof like trying to avoid the old double negatives that sometimes cause the mind to stop and confuse itself).

thanks.

Edited March 15, 2010 by DugDug

[brownsfan019 17]

As someone that knows zero about Taylor, I have to agree with DD that it's a touch confusing to say we are in a 'buy day' and the best trade was a short that was simply a failed test of a previous high...

 

 

So if the goal is get get all on the same page, incl those like myself that know zero, there's some education that needs done to explain how a short is the best trade on a buy day. If that is not the goal, then you might want to specify who this thread is for.

[richbois 10]

I must agree with you all about the confusion about the name of the days.

 

However I am trying to keep it the way Taylor designed it.

 

There is a reason for the names for each day.

 

The premise is that the markets are manipulated.

 

The Buy day is day 1 of the cycle. In order for them (manipulators) to buy they must take the price down to a level that is acceptable to them. This is done on the SellShort day and ends on the Buy day.

 

So, in the perfect world, the low should be made early on the Buy day and then a rally begins. Once they start the ball rolling they expect the masses to keep pushing the prices up.

 

The goal is normally reached by the end of the Sell day, where they unload their positions.

 

At this point the masses are still pushing the prices up on the 3rd day called the SS day (SellShort Day), and who is selling to the masses ??? Yes, the manipulators. At this point there is no more buyers and the price starts to drop, therefore making a perfect SS day.

 

By the way, they usually cover their positions before the close of the SS day.

At this point, the masses are catching up and going short - on the start of the Buy day. This is when the manipulators are accumulating their long positions.

 

So, all this explains why the Names exist. In a perfect world we buy on Buy days , Sell on the Sell day highs, and Sell Short on the SS day. etc.

 

Since Taylor wrote his book in 1948-50 the trading world changed because of the computers.

 

And secondly the world of trading is not perfect.

 

Now let’s take today's GBPUSD example. The markets closed Friday on the SS day highs. We know we need a decline on Buy days. So if the decline is not accomplished on the SS day then it is delayed to the Buy day. Either way at some point, on the Buy day, there will be the Buy Day low. That is the start of the cycle and the place to buy.

 

Firstly, we need to concentrate on the previous day's action. The high, the low, and the close.

 

The High or the Low will be the 1st place of battle. Based on the type of day that we are expecting, we should be able to anticipate which will be battled first. On GBPUSD Friday’s close was near the highs, so therefore that should be the 1st place to be tested. We know that today is a Buy day, so the test should fail in order to get a decline. As this happened, that was the place to short until the Buy Day Low is in place.

 

Then the word BUY starts to make sense.

 

The main difference between us and Taylor is that now markets are open 24 hours a day, and most of us are intraday traders.

 

I hope i made some sense of all this.

[DugDug 10]

Thanks Rich,

in terms of the names I guess then they key to remind ourselves is that we wish to align ourselves with the manipulators and not the masses. So we need to put ourselves in their shoes I guess. (my suggestion of renaming was not to change anything but to help give me the "aha" moment)

 

I think that this alignment causes issues with many traders as this I implies a bit of anticipation and targeting which is always something people warn against, with sayings such as - you cant predict the future. So we all wish to react, and read the market rather than anticipate it.

However by aligning ourselves with what the market is actually doing - in terms of a cycle - then we are listening to the cycle and going with the cycle - rather than just blindly watching and reacting.

 

The other thing I have always rallied against is the name a market manipulator - always has negative connotations. Would it be considered similar to thinking that they are just the big players - the market movers/the big volume. (I hate the use of the word smart money)

 

(always interesting for me, coming from some longer term trend following to where I always say "I have no idea where the market will get/go to, I just let the market take me for the ride", as opposed to trying to short term trade the mini trends)

[richbois 10]

Thanks Rich,

in terms of the names I guess then they key to remind ourselves is that we wish to align ourselves with the manipulators and not the masses. So we need to put ourselves in their shoes I guess. (my suggestion of renaming was not to change anything but to help give me the "aha" moment)

 

I think that this alignment causes issues with many traders as this I implies a bit of anticipation and targeting which is always something people warn against, with sayings such as - you cant predict the future. So we all wish to react, and read the market rather than anticipate it.

However by aligning ourselves with what the market is actually doing - in terms of a cycle - then we are listening to the cycle and going with the cycle - rather than just blindly watching and reacting.

 

The other thing I have always rallied against is the name a market manipulator - always has negative connotations. Would it be considered similar to thinking that they are just the big players - the market movers/the big volume. (I hate the use of the word smart money)

 

(always interesting for me, coming from some longer term trend following to where I always say "I have no idea where the market will get/go to, I just let the market take me for the ride", as opposed to trying to short term trade the mini trends)

 

I usually use the name Big Boys myself, but in the explanation above I used Taylor's words just to drive the point home.

 

TTT is a form of antipition but not at the extent of predicting the future. TTT gives us an idea of what may/should happens the next day together with some levels where this turn my occur. Taylor would then look at the ticker tape and watch the action in order to confirm the move.

 

Taylor was very strong at tape reading.

 

In today's world we have charts with different time frames to help us in this tape reading.

 

Therefore with the tools that you currently use to trade, TTT is there to help you be first on the side of the Big Boys and than the levels come into the picture.

 

I find that TTT does help the Day Trader since the trade doesn't last more than 36 hours in principle. As a Day trader on indices, most of us are out by the close. As far as FX and Commodities then yes trades may last 24-48 hours depending of the move and how good was your entry. I my case I sleep better when in cash.

[DugDug 10]

Absolutely the idea of anticipation still needs to be separated from the belief in prediction.

You still clearly need to wait for the actual trigger, that you anticipate COULD happen.

 

Interestingly enough this could still be used in longer term trend trading (discretionarily applied as opposed to purely systematic), as it could probably help improve entries, and possibly minimise some slippage, and whipsawing stops.

(I actually find I sleep better with my longer term positions, the shorter term trading recently has my brain ticking over way too much at present..... and big boys....that brings up whole other connotations. )

thanks.

Edited March 16, 2010 by DugDug

[richbois 10]

Absolutely the idea of anticipation still needs to be separated from the belief in prediction.

You still clearly need to wait for the actual trigger, that you anticipate COULD happen.

 

Interestingly enough this could still be used in longer term trend trading (discretionarily applied as opposed to purely systematic), as it could probably help improve entries, and possibly minimise some slippage, and whipsawing stops.

(I actually find I sleep better with my longer term positions, the shorter term trading recently has my brain ticking over way too much at present..... and big boys....that brings up whole other connotations. )

thanks.

 

Yes I have used TTT to enter long term positions in stocks. Once you know where the Buy day is then it does give you a bit of an edge in getting in at or near the low of the cycle. Then if the stock is actualy in a long term bullish mood then it is easy to stay in.

 

Or the other solution is you play part of the Big Boys game. For exanple you buy 200 shares of XYZ then sell 100 at the top of this cycle and rebuy that 100 on the next buy day. The only reason for keeping the 1st 100 shrs is in case XYZ is very bullish and only makes a shallow decline and you miss the re-entry.

 

There is lots of tricks in playing stocks compare to futures due to the leverage factor.

[Dinerotrader 10]

I hope i made some sense of all this.

 

Great summary post there Rich. Thanks. I am getting more familiar with the ideas here. Making the jump from this idea to your nightly statistical data is where I get some more confusion. If you can put together a post which shows the specific data you provide and how that can be used or not used that would also be helpful.

Thanks.

[richbois 10]

Great summary post there Rich. Thanks. I am getting more familiar with the ideas here. Making the jump from this idea to your nightly statistical data is where I get some more confusion. If you can put together a post which shows the specific data you provide and how that can be used or not used that would also be helpful.

Thanks.

 

Sorry but it is had for me to guess who is who i the world of nicknames.

 

Please tell me which instrument you want me to talk about

 

Also I cant do that on the forum all the time as it would'nt be fair to the paying customers if I post all the levels here all the time, but i will try

[Dinerotrader 10]

Sorry but it is had for me to guess who is who i the world of nicknames.

 

Please tell me which instrument you want me to talk about

 

Also I cant do that on the forum all the time as it would'nt be fair to the paying customers if I post all the levels here all the time, but i will try

 

Rich, I'm not asking you to post real time subscription data or that you do it on a regular basis.

 

I am just trying to understand how you go from your statistical data you provide to the charts and trade planning from your point of view. If you could show for example, the CL data you provided last night along with how you would use the various data points provided in trade anticipation, that would work.

 

Provide whatever you feel comfortable with, I'm just trying to better understand how to use what you provide and then determine if that compliments the setups I trade.

 

I trade oil (CL).

[richbois 10]

Rich, I'm not asking you to post real time subscription data or that you do it on a regular basis.

 

I am just trying to understand how you go from your statistical data you provide to the charts and trade planning from your point of view. If you could show for example, the CL data you provided last night along with how you would use the various data points provided in trade anticipation, that would work.

 

Provide whatever you feel comfortable with, I'm just trying to better understand how to use what you provide and then determine if that compliments the setups I trade.

 

I trade oil (CL).

 

Ok last night I was talking with a potential customer that was asking me my opinion on CL for today.

 

My answer was that we should get a rally and that my goal would be 1st the TTT PH line (previous day high) at 81.31 and that based on my 2 different types of averages for a Sell day rally we should get to between 81.44 and 83.32.

 

Well that is great prediction but if you were not long at yesterday's lows what do we do.

 

At the end of the day tomorrow CL made a nice ABC pattern and reversed. That would be what I would hope for if I missed my entry on the Buy Day Low.

 

Now if you were not sleeping you had a chance to enter during the night. We had the 78% retracement of the last push up and that was in the DP zone of the wave B. The DP zone is the green box on the chart. It was also between 300-327% extension on this wave down.

 

So that would have been my entry and would have been looking for the targets mentioned before.

 

In the case of my potential customer He was long allready so I hope he took his profit at the target zone.

[richbois 10]

Nice Buy day trade on TF this morning at the open.

 

We opened and reached TTT levels and reversed hard. We were also just at the DP zone on 240 min chart and we had a TS4 on MTP on the 3 min chart. Lots of divergence on both 1 min and 3 min.

 

Nice payoff so far.

[richbois 10]

Nice trade on OIL also

 

Today was a SS day and it opened below the Buy Day Low. We know have very good odds of atleast getting back to the BDL at some point today.

 

We made it and just made it. that was a $3 move cant complain here either as we rallied from in between the 2 penetration levels.

Edited March 22, 2010 by richbois

[snowbird 10]

richboise,

 

Sorry, but I'm very confused by your last post. I thought Taylor only advocated shorts on a SS day (no longs) which would indicate the only trade that should have been considered per Taylor was a short from the 80.4 region down to 79.5 or 79 if aggressive. Am I missing an important point of the Taylor method?

 

snowbird

[snowbird 10]

OK,

 

In regards to my last post, I did a search and found this comment from you last year in the TTT Thread.

 

"I do agree with you on what Taylor said, however in my discovery of the Positive 3 day cycle, I found that we can sometime Long on the SS day.

 

If the SS day opens below the Buy day low we do have very high odds of getting a rally to at least the Buy day low, at which point stops have to be tighten."

 

So in summary, there are cases where the price action of previous days would indicate a long on a SS day could be considered.

 

snowbird

[richbois 10]

OK,

 

In regards to my last post, I did a search and found this comment from you last year in the TTT Thread.

 

"I do agree with you on what Taylor said, however in my discovery of the Positive 3 day cycle, I found that we can sometime Long on the SS day.

 

If the SS day opens below the Buy day low we do have very high odds of getting a rally to at least the Buy day low, at which point stops have to be tighten."

 

So in summary, there are cases where the price action of previous days would indicate a long on a SS day could be considered.

 

snowbird

 

You answered your own question. Yes that is one of the few cases where a long on SS day may be considered. However these trades are a bit more risky since the instrument opened below the BDL and that is bearish. But my statistics show that it is worth taking the long as mos of the time they will at least make a college try to get back to BDL.

 

As we can see yesterday OIL made it but barely.

 

I personnaly didnt think it would make it all the way yesterday because of the large ground to cover, but hey they made it

[snowbird 10]

Your comment on risk is intriguing. When studying a new idea or method, I often personally find it helpful to concentrate on the setups that present the highest probability or most fundamental application first, and learn this well so it becomes ingrained or second nature before moving on to the more subtle details. I think one of the reasons for the success of Thales thread is that he started with a simple basic 123 pattern.

 

With Taylor, there appears to be so much to take in that many have abandoned the quest.

 

What have you found core to TTT that you would recommend a newbie to this method concentrate on first. (this question applies to all who have mastered or incorporated TTT in their own trading)

 

snowbird

[richbois 10]

Your comment on risk is intriguing. When studying a new idea or method, I often personally find it helpful to concentrate on the setups that present the highest probability or most fundamental application first, and learn this well so it becomes ingrained or second nature before moving on to the more subtle details. I think one of the reasons for the success of Thales thread is that he started with a simple basic 123 pattern.

 

With Taylor, there appears to be so much to take in that many have abandoned the quest.

 

What have you found core to TTT that you would recommend a newbie to this method concentrate on first. (this question applies to all who have mastered or incorporated TTT in their own trading)

 

snowbird

 

Good question. What I have found about Taylor is that it is best used in conjonction with an other sysyem. For example If you use the simple 123 pattern, you will have a better chance of success if you are taking that trade in the direction that TTT is pointing that day, and even better if it happens at TTT levels.

 

Reading the original Taylor's book from Chapter 5 to 15 a few time will make you understand how to trade on each day of the cycle. Once you undestand that for example, on a Buy day you should only be looking to long except in this or that exception, then you will look for the right trade that day. Having said that, it doesnt mean I never take a trade that is in the opposite direction, however if I do, it will be only with smaller position and tighter stops and I will take or protect profit sooner.

 

The main purpose of TTT for me as a DAYTRADER, is to get a BIAS for the day, and Support and Resistance levels. These levels also help on the exit of the trade, because we know how far a normal move should take us, we can then either exit the trade or again protect the profits on that trade.

 

I hope that helped

[BlowFish 10]

snip

 

With Taylor, there appears to be so much to take in that many have abandoned the quest.

 

What have you found core to TTT that you would recommend a newbie to this method concentrate on first. (this question applies to all who have mastered or incorporated TTT in their own trading)

 

snowbird

 

I am one of those Having said that I figured that if one was inclined they could probably condense things down to half a dozen (or less) pages of principles, tables and 'rules'. There seems to be a lot buried in text that could be fished out into simple tables and what not.

[richbois 10]

I am one of those Having said that I figured that if one was inclined they could probably condense things down to half a dozen (or less) pages of principles, tables and 'rules'. There seems to be a lot buried in text that could be fished out into simple tables and what not.

 

I tried to do that in my Guide to trading TTT

 

I need feed back on that so I can improve

[snowbird 10]

 

The main purpose of TTT for me as a DAYTRADER, is to get a BIAS for the day, and Support and Resistance levels.

 

I hope that helped

 

The above does actually resonate with me, if that bias actually gives one an edge.

 

I know many traders will say that any bias is bad, but I often find that when I'm in the middle of a trade I will see a pattern, set of candlesticks, etc develop that will cause me to exit the trade short of my objective, only to see price rebound and continue on to the original target. I know this is due to my inexperience, but until I gain confidence I can see how a simple rule based on an edge that may indicate something like "longs only today" could be very powerful to me personally, which is one reason I'm interested in learning more about this.

 

snowbird

[richbois 10]

The above does actually resonate with me, if that bias actually gives one an edge.

 

I know many traders will say that any bias is bad, but I often find that when I'm in the middle of a trade I will see a pattern, set of candlesticks, etc develop that will cause me to exit the trade short of my objective, only to see price rebound and continue on to the original target. I know this is due to my inexperience, but until I gain confidence I can see how a simple rule based on an edge that may indicate something like "longs only today" could be very powerful to me personally, which is one reason I'm interested in learning more about this.

 

snowbird

 

What is nice of using TTT is not only the bias, which will give you more confidence in that trade , but also the levels that are provided in the report. There is more than just the TTT levels. So if you managed to enter a trade at or close to the extreme for the day, you have an idea of what an average day should provide. This way you may let it ride longer. Also if you entered a trade late, you know that after X points of profits you should be protecting that profit and even considering closing that trade.

[snowbird 10]

something that puzzelled me at first about TTT that I 'd like input on. Trading rules applied to an instrument or it's inverse (take etf's for example.... SPY vs SH or QQQQ vs PSG) should not contradict each other.

 

So is it too simplistic to count an SS day as essentially a Buy day on the inverse index, a Buy day as essentially an SS day on the inverse index, and treat the day in between (S day in this case) as typically a transition day between SS and BU or vice versa?

 

It appears that taking into consideration the additional TTT rules (Buy day violations, opens below or above previous days highs or lows, etc., that this high level simplistic view would result in the fewest contradictions in the more specific rules day by day.

 

All thoughts welcome.

 

snowbird