[smoothdrive]

Hello WHY?

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

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

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

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

TIA

Gary

Originally Posted by WHY? »

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

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

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

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

[Dogpile]

Back to Taylor,

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

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

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

just FYI.

[WHY?]

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]

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]

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?]

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?]

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]

Originally Posted by WHY? »

. 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.