WHY?

Looking at a chart of todays price action from the perspective of it being a buy day Taylor would have probably skipped any shorting and went long around 11:20 or so and out that afternoon with a 4 or 5 point gain as the rally back was weak. From the perspective of it being a sell day today 2/17 (2nd day of the cycle), the entry and exits would have been about the same time as the above. That is just how price action panned out today.

All the quotes above are from the PDF version of The Taylor Trading Technique

One must always remember that you are playing for the odds in your favor. Taylor had ideal setups and there are less than ideal setups. Ideal setups put the odds in your favor. Less than ideal are more risky but many times still tradeable. Much depends on how much risk one is willing to take. In the end it is discretionary. The system gives you a framework for trading. Exact entry and exits and the decision to make a play or not are purely discretionary. Thus on shorting a a buy day high made first AFTER it trades close to or penetrates the high of the previous day (the SS day) puts the odds in your favor. Shorting a high made first on a down opening on a buy day that does not penetrate the high of the previous session or come close to penetrating it is LESS than ideal and more risky. The trend can turn fast back up. IF I traded such a senario (and I probably would not but would pass) it would be with eyes glued to the screen and I would probably be out of the postion with a quick but smaller profit and try to not plan on capturing any larger move as the odds are against me. On any given day there is a main trend and many cross currents. Sometimes a couple of main trends. Trying to short or go long on cross currents is what Taylor tried to avoid. Not that it can't be done but his game was to try a catch a goodly portion of the main trend of the day. That was it.

Generally speaking pre market or pre day session opening should be used for mostly for indicating what the day session will open at. Therefore, it is best not to trade in the premarket. I wouldn't say never do it but it is best to see what the market does at the open of the regular trading session. Would it be ok to short 2/17 if it was a buy day on a buy day made first? The problem is you don't know in this case IF it is the high made first or the low made first. In a weak market like this only allowing some time to go by will one be able to determine which was made...the low or the high. Taylor says a short sale on high made first on a buy day is generally a "weak" short sell. He also says NEVER short on a buying day when the low is made first by "opening down" p 42 as there isnt enough certainty to make a profit because of the spread not being enough. On page 43 he says a high made first on a down opening on a buying day would be of no interest to us for short selling as this could cause the low to be made last. Page 28 pdf version of the book says: "Now, we go back to the close of the Short Sale Day and we find that it was a 'flat' closing, then from this indication we expect a lower open on the Buying Day and so far this would cause the low to be made first and is a stronger indication when made early in the session that a rally would start from this low and hold the gains for a strong closing". Remember, the decline is from the SS day high to the buy day low except on those occasions where the decline continues on the sell day causing a BV. With this in mind one could see that if today were a buy day (2/17) that it opened weak and the slide would be down. Taylor says buying low points made first on a buy day are usually profitable except in declines where a steep downtrend has begun. In summary IF 2-17 were a buy day and a down opening I would leave the short side alone and wait until the last possible time before noon to see IF any low made holds or is supported and then look at going long. However IF by the end of the day it looks like it will close weak then the best thing for me to do would be to sell it out any long I may have taken with a small gain or loss as NO rally was forthcoming from the low made first on the buy day. On a buy day of one goes long and the low closes flat then one is on the wrong side of the trend. Get out. Of course this is different IF it is in an uptrend. Failures to penetrate previous days high early in the session in an uptrend can possibly be a shorting opportunity. Remember, the Taylor game was to catch the larger trend of the day. And of course it isnt 100% but his rules protected one when the system was wrong about the price action.

Today 2/17/09 is obviousley a BV made on a sell day or the second day of the cycle. This presents a long opportunity in this slide down, however, one must not attempt to capture much as the market is very weak. Just a few quick points and out. Any decent rally back towards 2/16's low is the exit point. Again market is weak. We could perhaps see an afternoon rally of sorts..then again we might not so wisdom indicates exiting on any profit one can grab on any rally back to yesterdays low.

Weak closings forecast failures to penetrate ‘top side’ on the rallies after declines, while strong closings forecast failures to penetrate ‘down side’ on the declines after rallies. p47 "A weak closing on a Short Sale Day, may indicate a lower opening on the Buying Day—and we get set to buy on the low made FIRST—" p43 "Now, we go back to the close of the Short Sale Day and we find that it 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 and is a stronger indication when made early in the session that a rally would start from this low and hold the gains for a strong closing, which in turn indicates an up opening and a penetration of the Selling Day Objective—the Buy Day High." p 28 "When the low and close are about the same on a Short Sale Day, we usually get our (BU) Buy Under, the price goes lower, next day" p71 When BU's are made tape reading skills must be especially sharp. Do not take long position on a BU UNTIL support has come in per the tape. Qutoes from: The Tayor Trading Technique pdf version

how do you delete a post here? sometimes my post gets listed twice but i came seem to find a delete function on the forum?????

"When a reaction takes place after a penetration of the Selling Day High and the movement is in ‘no hurry’ and the stock just trades down, we stay short anticipating our covering point, next day, on the Buying Day. We can cover the short sale when we buy our ‘long’ stock or perhaps a little before—to trade in this way gives you a little more time to concentrate on your Buying Day Objective—this point for both covering your short and your purchase will be—at a little above or below the low of previous day—the Low of Short Sale Day." The Taylor Trading Technique PDF version p 39 This was the action of today 2/13/09 in the S&P. The short was the trade to make. Exit was discretionary. Same day or since decline was slow one could hold and exit next session. Again, another taylor play that could have easily rendered 8 to 10 points. It opened trade thru the previous days high then the sell off began. One would have covered the short by noon or could even wait and cover next trading session since decline wasn't fast but took all day.

"When a reaction takes place after a penetration of the Selling Day High and the movement is in ‘no hurry’ and the stock just trades down, we stay short anticipating our covering point, next day, on the Buying Day. We can cover the short sale when we buy our ‘long’ stock or perhaps a little before—to trade in this way gives you a little more time to concentrate on your Buying Day Objective—this point for both covering your short and your purchase will be—at a little above or below the low of previous day—the Low of Short Sale Day." The Taylor Trading Technique PDF version p 39 This was the action of today 2/13/09 in the S&P. The short was the trade to make. Exit was discretionary. Same day or since decline was slow one could hold and exit next session. Again, another taylor play that could have easily rendered 8 to 10 points. It opened trade thru the previous days high then the sell off began. One would have covered the short by noon or could even wait and cover next trading session since decline wasn't fast but took all day.

In regards to your first question I will need to look that one up. There are some typos in Taylors book and that could be one. However, at the moment I am extremely busy well drilling but when I get a chance I will take a look at it. The gap down on 2/12/09 in the S&P happened on a sell day (by the count you guys are following) so it was a BV. The Taylor play would have been to buy that BV once the tape indicated some support. Then sell out at or near the low of 2/11/09 thus giving one a gain of 10 to 14 points depending on exact entry and exit levels. The low that came later would not have been a low Taylor would have taken advantage of. All BV must be made soon after the open (i.e. early in the session). You don't even buy a BV if it is made in the afternoon. While 2/12/09 would have worked out just fine going long on the second low made later in the session the taylor rules would have prohibited going long. Why? Usually BV do not rally back this strong so one would get caught in a cross current if they went long and no such rally was forthcoming. A word about HB. Higher bottoms are looked at mostly in terms of an HB on a buy day. That is, HB indicate a play but only on a buy day. If they are made on any other day they dont carry the same significance as they would on a buy day. So, an HB on a buy day is a higher bottom (higher low) held all day than the previous days low i.e. the sell days low. Regarding price action for today 2/13 one would look at shorting it after penetration of yesterdays high (2/12's high). Again, no need to consider an HB here because today is an SS day and HB's don't mean much in terms of making a play today (for entry i.e). Of course the exact entry must be determined by intrady tape reading. The tactic would be to short and cover same day especially if the decline is fast. However, one needs to wait for the regular (day session) to do the intraday tape reading to confirm any premarket penetrations and entry points.

In regards to your first question I will need to look that one up. There are some typos in Taylors book and that could be one. However, at the moment I am extremely busy well drilling but when I get a chance I will take a look at it. The gap down on 2/12/09 in the S&P happened on a sell day (by the count you guys are following) so it was a BV. The Taylor play would have been to buy that BV once the tape indicated some support. Then sell out at or near the low of 2/11/09 thus giving one a gain of 10 to 14 points depending on exact entry and exit levels. The low that came later would not have been a low Taylor would have taken advantage of. All BV must be made soon after the open (i.e. early in the session). You don't even buy a BV if it is made in the afternoon. While 2/12/09 would have worked out just fine going long on the second low made later in the session the taylor rules would have prohibited going long. Why? Usually BV do not rally back this strong so one would get caught in a cross current if they went long and no such rally was forthcoming. A word about HB. Higher bottoms are looked at mostly in terms of an HB on a buy day. That is, HB indicate a play but only on a buy day. If they are made on any other day they dont carry the same significance as they would on a buy day. So, an HB on a buy day is a higher bottom (higher low) held all day than the previous days low i.e. the sell days low. Regarding price action for today 2/13 one would look at shorting it after penetration of yesterdays high (2/12's high). Again, no need to consider an HB here because today is an SS day and HB's don't mean much in terms of making a play today (for entry i.e). Of course the exact entry must be determined by intrady tape reading. The tactic would be to short and cover same day especially if the decline is fast.

You could also short a buy day high made first per Taylors rules. So, you have potentially a long opportunity and a short opportunity depending on which long opportunity works out for you..i.e. low made first or holding an HB in the afternoon on Friday 2/13/09

Rich Exactly what instrument are you looking at? And exactly what time did the high of 2-5 and the low of 2-6 occur?

Discussing the regular trading session; the open of regular trading session 2-6-09 (not premarket) was gapped above the close of 2-5 and the low of 2-6-09 never filled the gap or came close to the high of 2-5. While premarket action is included in the OHLC figures in my trading of Taylors system I don't consider the open of the premarket very significant when looking at gaps. That is, the significant gaps down or up occur in the regular trading session.

Sometimes you can take a Taylor statement and reverse it and get an additonal gem out of it that isn't in his original book. For instance p62 1st col last paragraph (in the pdf form of the book) or page 63.. 2nd col first paragraph (of the written book) says; “On a Buying Day when a stock or future shows no tendency to rally and looks like it will close ‘flat’, that is, the low and close at the same price, it usually goes lower” The Taylor Trading Technique Now turn that around and make that say: On a buying day when a stock or future shows no tendency to decline and looks like it will close high, that is, the high and the close at the same price, usually it will go higher. This is what happened on Friday 2-6-09 in the S&P and caused a zero decline and a HB and was a good place to go long AFTER some confirmation.

I made a mistake in my typing in post #420 where I typed: A decline zero is simply when the low of the buy day stays ABOVE the low of the previous day i.e. the SS day. That should read: A decline zero is simply when the low of the buy day stays ABOVE the high of the previous day i.e. the SS day. Sorry about that. Hope I didnt confuse too many folks. I was tired.

I might add that just as a decline zero indicates higher prices for the next session or two a rally zero indicates LOWER nearby prices. All of this is in Taylors book. A decline zero is simply when the low of the buy day stays ABOVE the low of the previous day i.e. the SS day. A rally zero is when the high of the sell day (the 2nd day in the cycle) stays BELOW the low of the previous day (i.e. the buy day). This creates what Taylor calls a BV or buying day violation and it means lower nearby prices but also means a place to take a long trade for a quick profit. However, strict rules must be followed to make this long trade and to be successful in it.

Shamal, What happened on Friday 2/6/09 is what Taylor calls a Decline Zero. He also say that a decline zero usually means higher prices for a day or so or even longer. He also says that all decline zero's are also what he called an HB or higher bottoms and that higher bottoms are usually profitable. Taylor was always trying to anticipate the markets next move. In this case, the hint of a higher bottom to come was the high being made last (or after the low) on the previous day i.e. on 2/5/09 (the SS day) In the pre market hours for 2/6one could see the price moving up as one awaited the opening on 2/6. All this was followed by a gap up open (regular session) on 2/06/09 that never got filled on a retracement. Both of these indicated very bullish. So how does one trade in such a case? Well, first of all it is not the IDEAL buy day in terms of a normal buy day activity. Nor is it a LESS than ideal buy day. In fact it is what I would call a SUPER buy day. All the marks were there for a very bullish move. The big problem here is that it would take some really good tape reading skills to determine if one should go long on this HB made on a gap up open that never got filled. Odds favor that such a gap would see some retracement within first hour of the normal session. Since it didnt that was a further indication to go long as we were seeing a bullish day. Even if one had waited until 11:30 or noon before deciding to go long on the HB it still would have been profitable by the end of the day. The high close on 2/6/09 further indicates more bullish activity. As Taylor says decline zero's and HB's are usually profitable and the trend up will usually continue for another session or two and sometimes more. I would expect to see some more trend up on the next trading session especially if it breaks thru 876 on the next trading session. Taylor allowed going long on decline zero's or HB's. However, these opportunities to go long on a buying day need confirmation before taking a position and the confirmation can only happen by allowing some time to pass in the session. Gaps up should fill pretty quickly. If not, think bullish. HBs that are way off the previous days lows (i.e. the SS day low) that hold on intraday declines indicates support. But one does have to wait for confirmation. At least give it time. At the very minimum 11:30 to noon and preferably wait until the last hour or two of trading.

Hope my previouis post points out how Taylor would have traded and makes things a little clearer.

I would like to make some comments here concerning how Taylor would have seen the price action today by Richbois count being an SS day. Finally, what he most likely would have done. Today was a failure to penetrate early in the session. However there was an immediate decline so why not short this decline?? Taylor says you have to recognize such action and trade on it even though it is a difficult trade to make many times it is very profitable. The key is knowing when to put out the short sell. This requires some tape reading skills. But in this case one would NOT short on 2-5-09. Why? First, I take a few quotes out of his book concerning failures to penetrate the objective. "In the beginning it might be well to study these failures to penetrate and the results of them before buying or short selling but you have got to recognize this action and trade on it, for while it is a most difficult ‘play’, at the same time many of the most profitable moves take place from failures to penetrate at both tops and bottoms. The failures to penetrate Buying or Selling Objectives are not exceptions to our method of trading, for a little study of the past movements of stocks and commodity futures will reveal that this action takes place approximately 40% of the time on an average, at either of these points, therefore, this movement is a very definite part of the method as a whole." "When a stock makes a high FIRST on a Selling Day with a penetration of the Buying Day High, then reacts and is selling nearer the low of the day at the close, the indications are for a lower opening on the Short Sale Day. Should the lower opening occur, after the decline the stock or future will make an attempt to rally, in most cases, and this rally will penetrate the—High of Selling Day—if the immediate trend is higher, however, should the rally fail to reach this Objective and at the top of this rally the activity dies out and the trading narrows down to a few transactions at about the same price, then begins to ‘sell off’, we would ‘put out’ a short sale on this declining trend and J-U-S-T as it starts." Quotes from p 46 The Taylor Trading Technique. Now a quote about price action on an SS day "We try to make all short sales on the high made FIRST on penetrations of—Selling Day Highs—‘This is the most favorable action for your play’—we would not ‘put out’ a short sale where the stock or future opened down and declined future, without a rally, for this action would carry the implications that rally, should it start later in the session, may cause the closing price to be up near the high of the day and this would be making the high LAST on a Short Sale Day, indicating a 46 future rally, and an up-opening but where the stock opened at the same price as the previous close and declined early in the session and then rallied higher than the opening price or for a penetration of the Selling Day High—we would ‘put out’ a short sale just as this rally began to exhaust itself after the penetration. This action is not as favorable to our trade as the above." P 39 The Taylor Trading Technique. In summary, when there was no decline followed by a rally that failed to penetrate it is best to pass by the short. While one "could" have shorted and come out ok today in many cases one would get caught in the cross currents. Thus Taylor would have probably passed by shorting today right after the open. Now taking the count as Elovemer did it was a buy day. First, some Taylor quotes from his book The Taylor Trading Technique "The Short Sale Day Low is our point to watch and we watch for it to be reached or for the price to sell under this point, since this is where we buy our long stock." p28 Since today was a buy day by Elovemer count then yesterday 2-4-09 was an SS day. It is very important to watch the close oin the SS day to judge where you will probably be buying your long at on the next day. In this case the low close on the SS day 2-04-09 indicated a further decline on the next day 2-5. So one wouold be expecting to buy probably go long on a lower low than the previous days low made on 2-4. "Now, we go back to the close of the Short Sale Day and we find that it 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 and is a stronger indication when made early in the session that a rally would start from this low and hold the gains for a strong closing" p28 "On a Buying Day when the stock rallies from the low and the gain in points is sufficiently large, we sell out on the same day."p27 "The Buying Day—for our long stock provided the decline ends at or near this low but we can with reasonable certainty figure whether this low will be our buying ‘spot’ or if we may not expect further concessions to buy on and we get this indication from the way the stock closes on the Short Sale Day. We get this indication by watching the close and whether prices are up or down, that is down from the high of day or up from the low of day, weak or strong. Remember, we are watching the prices on a Short Sale Day trying to anticipate the coming point at which we can buy or go ‘long’" p 27 What would Taylor have done on 2-5-09 if the count said it was a buying day? First, he would have taken note of the close on the previous day (ss day) and seeing it close weak he would have expected the decline to continue on down after the open on 2-5. Therefore, he would have waited and as the tape indicated the decline was stopping he would have went long. Within an hour or so of the opening he would have been long and probably flat by the close today 2-5 with a good gain.

Good job Elovemer! Nice Taylor play. I will have some more comments on todays price action later on tonight as I have other things to do today. Again, general downtrend...going long using Taylors rules...bucking the the longer term trend and making money. Why? Because of these cycles and the rules that apply to each cycle. Today was obviousley a failure to penetrate. What does one do in such a case? The answers are to be found in Taylors book. I will make more comments tonight..gotta run.

Taylor would have used classical tape reading (price/vol). That is why VSA could be useful to coordinate with Taylors method.

Actually, he said right the opposite. You don't count holidays or weekends. "The book is always kept in this order, never change the continuity and there are no lines left open for Sundays or Holidays, the market is considered as a series of continuous sessions without a break." P 15 The Taylor Trading Technique What Taylor mean't by the above was that in his book he didn't have a blank line for Holidays...or days the market was closed. He totally ignored such days as if they didn't exist. His book was made up of as if the market was continuous with no interuptions of holidays or days the market was closed.

If I have Rich's count correct 2-5-09 will be a SSday. The strategy for that would be to short on a high made early in the session that penetrates or comes close to penetrating the hiogh of 2-4. However, it closed a bit weak so the odds are for more decline first on 2-5. Thus in Rich's count we will probally have a failure to penetrate the high of 2-4 on 2-5. The only option is a shorting option per Taylors rules on 2-5 IF using Rich's count. But that has to be made first to be a valid option. IT still could be but the odds favor it won't. If trading by Elovemors count 2-5 will be a Buy day. The play is long on a low,made first. This is a likely senario for tomm. 2-5-09. However, if it were to open and trade up fast then one would look to short early in the session once it tanks. The potential exists to go long first and if still early in the session on could even short it but the second trade would be a riskier trade. On a buy day you generally only short when the high is made first and go long when the low is made first.

Richbois labeled monday as an SS day....tuesday a Buy day and Wed and today (2-4-09) a Sell day. However, for Elovemor monday was a buy day....tuesday Sell day (mid in his terminology) and wed today (2-4-09) an SS day (or Sell day in his terminology). It opened made high first and traded down. The play by Elovemor data would have been to short it and cover same day after the decline or even wait and cover tomm 2-5-09. The play by Rich's data would have been to sell any longs from previous day. Since no shorting is allowed on the second day of the cycle (per Taylor) one would not have shorted if using Rich's data. Neither could one have went long on today 2-4-09 on Rich's data as the rules don't allow taking a long position on the second day of the cycle unless a BV (buying day violation ) is made and made early in the session. That is, it would have had to make a lower low than yesterdays low and it would have had to do that early in the session to be able to take a long position today. Since that didnt happen, IF one was trading by Taylor rules and using Rich's "count" all one could have done today is sell longs from tuesday (if held overnight from tuesday). This all is providing I understand the sequence of their counts.