Taylor Trading Technique

[monad 10]

Hakuna, appears you are getting the hang of this methodology, despite what anybody says, there is considerable potential. WHY? is absolutely convinced of that and I tend to believe him after having observed the price action over the last couple of weeks.

[HAKUNA 10]

Monad, From your posts in which you have enumerated the various scenarios for each day, you are obviously ahead of me in your understanding of Taylor's method.

 

Elaboration via examples provided by WHY? for the buy day was brilliant, am looking forward to those for the SELL day and SS day. With a long weekend ahead(Monday being Martin Luther King Holiday) he may find time to address that.

 

Meantime am rather pleased to see the market pan out on Friday according to Taylor's strategy for Buy Days.

Monday 19th - the Globex should be in operation, hence would be a SELL day.

[WHY? 16]

In reference to my post #349 the lesson to be learned is that his rules will save you from a larger loss. And potentially give you a better position.

 

I refer you to his book (The Taylor Trading Technique) page 37 5th paragraph "When a purchase is made on a buying day low and should this gain be partly lost on the opening of the selling day or opens at the buying day closing price - sell out 'at the market' without waiting for the next transaction to appear on the tape." He gives his reason in paragraph 8 of the same page. In a nut shell what he says there is that trend up is weak and it will probally fail to make the penetration of the buying day high. He says that it should have opened up and continued up if the immediate trend was really up. He says it is better to take a small loss than to hold on and chance a bigger loss. He also says in the same paragraph should the opening on the selling day be down and decline sell out on any rally thru and above the low of the buying day.

 

On page 37 2nd paragraph he says "A buying day purchase must show a profit-that is-the spread from the low to the closing price and not lose it on the opening of the sell day." If it does he says to get out as it doesn't favor your play. In paragraph 8 of the same page he says "if going higher should have opened up and continued the rally......we follow the market and never try to make it"

 

On page 35 1st paragraph he says if after buying on a buying day you get caught in a BV on the following sell day then you must try to get off the hook with as little a loss as possible.

 

So, 1-13-09 was a buying day, One could have gone long and then sold, reversed and shorted and then covered all before noon and been flat at the end of the day on 1-13. However, if one chose he could have went long on 1-13 and held the long until the next day 1-14 (which would be a selling day). This was Taylor daytrading method. If one had done the latter he would be in a loss right after the open. To avoid further lose from having gotton caught with a long position, in a weak rally, he would have sold right after the open. Again, it opened down and declined further making a huge BV. It DID not hold its gain from the close on 1-13 to the open on 1-14. According to Taylor you must always play for the odds in your favor. Cut the losses, wait for the decline of the BV, and go long from that point. Classic Taylor trading. Rules, that if followed on a selling day can save you from bigger losses lpus give you a better position.

 

Another thing to take note of is that up until the long position taken on 1-13 it had been a bear market which favored a BV being made on the next day that is on 1-14. If you know it is a bear market and there is little, if any, indication the bear market is at an end, then your best play is to be flat at end of the day on 1-13 and not carry the position overnight. Why? The reason is more BV's tend to be made in downtrends. It would be much better to take whatever profits your long position gives you on the buy day 1-13, and be flat at the end of the day, and wait for the BV and a better long position on 1-14.

 

See how the three day cycle and its rules both works to your benefit?? Hope this helps.

Edited January 19, 2009 by WHY?

[WHY? 16]

ON 1-16 Buy day the market did recover a bit of the decline as I mentioned in probally would in a previous post (#349) Also, the best Taylor opportunity on 1-16 was a shorting opportunity as the high was made first and the low made too late for going long EARLY in the session. On the flip side of the coin here is Taylor making money and doing it by shorting on day that a bit of recovery from the decline takes place! Again classic Taylor. Catching the real move of the day and not getting whip-sawed.

 

Finally, a long position could have been taken on 1-16 between 12 and 2:00 on what Taylor calls a higher bottom. A HIGHER BOTTOM is when on a buy day, all day, it has held a higher low than the low of the previous day (SS day) and it is in the afternoon. This long position HB can be held until the next day or it can be sold same day on any decent rally. By the end of the day on 1-16 it could have been sold for a profit but the odds in this case favor holding it for an even bigger profit on the next trading session. Why? The bit of recovery made on 1-16 and the higher close on 1-16 indicate the immediate trend to be up. We will see on the next trading session. It immediate doesn't continue up as expected then Taylor has rules to cover that too.

[HAKUNA 10]

Great analysis WHY? as usual, the market indeed gapped up to 860 on the globex and gradually declined with a rapid fall 7a.m EST

 

Guess they took the cue from the European bourses where the prices have violated the Buy Day Low.

 

Find each day fascinating now to observe how the rules set by Taylor way back in 1950 stand upto the modern era of electronic trading. But as you and richbois have mentioned it does require considerable effort to decipher these from Taylor's work. I believe from what I have read, that he was fully conversant with Wyckoff's work. Infact many of the setups he describes are reflected in Vadym Graifer's book as well..which in many ways is based on Wyckoff.

[WHY? 16]

Great analysis WHY? as usual, the market indeed gapped up to 860 on the globex and gradually declined with a rapid fall 7a.m EST

Yes, and any long entered on 1-16-09 (buy day) and held into the trading on Globex 1-19-09 (sell day) would have ended an excellent exit on the gap up. 1-19-09 was sell day and since it closed in upper range on previous trading session 1-16-09 (buy day) the odds favored a penetration of the buy day on 1-19-09 which is what happened. The immediate trend was up. Again this is clasic Taylor keeping one on the right side of the immediate trend.

[WHY? 16]

1-20-09 is a SS day by the "count" we are taking. It is important to take note that Taylor says weak closing on a sell day tend to forecast failures to penetrate the high of the sell day on the next day (i.e. the SS day). He says "when stock makes a high first on a selling day (1-19-09) with a penetration of the buying day high (and it did on 1-19-09), then reacts and is selling nearer the low of the day at the close (which is what happened on 1-19-09 the sell day), the indications are for a lower open on the Short sell day (1-20-09). Should the lower open occur (odds favor it will), after the decline the stock or future will make an attempt to rally, in most cases, and this rally will penetrate the high of the selling day (1-19-09) 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 and the trading range narrows down to a few transaction at about the same price, then begins to 'sell off' we put out a short sale on this declining trend and just as it starts." page 48 8th paragraph.... The Taylor Trading Technique. Parenthesis mine for clarification in this market we are tracking.

 

He later goes on to say in on the same page if after one puts out the short sale and it shows signs of tightness by going quiet and not making new lows then cover. The above is senario one for tomm 1-20-09. Another senario is it opens down and continues down without any rally. In such a case leave it alone. In a third senario if it fails to make the objective (penetrate the high of the selling day.. 1-16-09) because of a SEVERE decline at the open on 1-20-09 then it is better to also by pass the trade and not short it. Why? because a rally could start later in the session and may make the closing price near the high of the SS day (1-20-09) and in such a case it would be best to wait for the shorting opportunity on a high made first on the next day i.e. 1-21-09 (following buy day) . Senario 4 it opens and trades up immediatley...one watches for it to hit resistance and then puts out a short sale and covers same day on the decline. This is the most favorable play for making money by shorting on an SS day but perhaps not a likely senario in the present situation. But, it could happen. The odds just don't favor it.

 

Weak closing on rallies on a sell day tend to indicate failures to penetrate the high of the sell day on the next day and also indicate possible violation of the low of 1-19-09 on 1-20-09. Since the very immediate trend is a bit higher senario one above may be what we see tomm. But, whatever happens one has a strategy to deal with it.

 

Tomm 1-20-09 is a day for shorting ONLY (no longs per Taylor). Whatever happens one should try and close out (cover) cover the short the SAME day IF the decline or sell off if severe after taking the position. If after taking the shorting position the decline is "slow" and in no hurry, and it appears it will close near the low then one can stay short and anticipate covering on the next day (buy day 1-21-09) on low made first. And as usual, the earlier in the session that the senarios play out the better it is for making money. You want to short on SS days fairly early in the session otherwise, it is probably best to wait and short on the following buy day ..on a high made first. It is not recommended one short on a SS day on a high made last. The odds will not be in ones favor is such a case.

 

We will see what the market brings us on 1-20-09. The odds slightly favor senario 1.

Edited January 20, 2009 by WHY?

[HAKUNA 10]

Scenario 4 (selling at resistance) is being played out very nicely on European bourses.

 

Even a long was profitable though not stricly keeping with Taylor but tape reading dictated so early on.

[BlowFish 10]

Is Europe in step with the USA? With the holiday and stuff. A real nub question is it acceptable to start a book from a major high (obviously starting with a sell day there)?

 

I did scan the book this weekend. For me it's going to need going through again with a notepad. I am a bullet point sort of guy and while the information did not seem difficult to grasp it seemed quite tangled up, it seems kind of hidden in the walls of text. It does seem to me that it should be possible to boil it down to a dozen or so principles or even rules.

[monad 10]

As WHY? says it will require 50 reads or some more:), most give up by then.

When you manage do boil it down to a few principles, would be glad to see them

[richbois 10]

Is Europe in step with the USA? With the holiday and stuff. A real nub question is it acceptable to start a book from a major high (obviously starting with a sell day there)?

 

I did scan the book this weekend. For me it's going to need going through again with a notepad. I am a bullet point sort of guy and while the information did not seem difficult to grasp it seemed quite tangled up, it seems kind of hidden in the walls of text. It does seem to me that it should be possible to boil it down to a dozen or so principles or even rules.

 

Yes the European Markets are on the same Cycle as the US at the moment, and the holiday didnt change the US cycle since we traded on that day.

[BlowFish 10]

As WHY? says it will require 50 reads or some more:), most give up by then.

When you manage do boil it down to a few principles, would be glad to see them

 

Understandable why people don't stick with it then , Seems like there are far simpler concepts to trade with, for example simply drawn S/R and reading PA based on a couple of simply learnt patterns.

 

Probably the most time consuming and complex thing I learnt was Drummond Geometry. It takes several months to go through the lessons putting in a full day each day. Took me at least a dozen times through to really get it (many take longer if in fact they make it) - and I am a fairly quick learner. Whilst the stuff I absorbed is invaluable and has shaped my whole perception of the markets positively, there are far far, easier ways to trade successfully. Sounds like maybe Taylors Material might be similar? I am rather fascinated by it however.

 

Actually I wonder how many principles there are? Thats assuming it is based on principles. I can take exceptions special cases and what have you but unless there are a fairly firm set of principles I will probably find it difficult.

 

As an aside 're-writing' (even if its extracting bullets or taking notes in your own words) is a great way of learning imo. It has stood me in good stead learning complex things in the past. It's simply making a commitment to really get stuck in.

 

(P.S. I have found your notes useful, thanks)

[monad 10]

Well it is your choice, take the easy route of S/R and price action with patterns with Drummond Geometry, why bother with Taylor at all if there are far easier ways to trade.

[BlowFish 10]

Well it is your choice, take the easy route of S/R and price action with patterns with Drummond Geometry, why bother with Taylor at all if there are far easier ways to trade.

 

Just interested really. Over the (many) years I have learnt various methods, a small handful even to the point that I have traded them, others that I respect but don't suit me and a majority that plain out make no sense to me at all I have an interest in how different people trade, after all actual trading itself is pretty boring. I find the premise it is based on interesting too, there are a numerous other facets that I find appealing to the approach, not least of which that it is fairly novel. Lots of reasons, some that are perhaps not typical.

[HAKUNA 10]

who you kidding blowfish:) You have obviously seen value in this methodology unfolding via the recent posts , scenarios which have been put forward prior to the day in question being played out in front of everyone to see on that day.

 

I can only hope you are not going to pull db's tactics in here. Looks like he still hasn't got the message, now he is at loggerheads with Eiger. Personally I did not question his knowledge on Wyckoff and his contribution. Obviously a thick skinned individual, battle hardened one would say - clear evidence of previous prolonged experience in controversy not only on this website, but perhaps also on others. Totally unnecessary.

 

You can observe the systematic progress made on this single thread. He has managed to establish a whole forum and countless threads with wyckoff concepts instead of explaining the principles on a daily basis, however that would involve getting into some realtime nitty-gritty.

[monad 10]

Agreed, if somebody already has a easier way of trading and is making money, then what is the point. Idle or passing curiosity out of boredom don't think will work with Taylor, it will just get more boring as it is a real slog to go through the book. Better to take up another hobby to deal with boredom or join a gym.

 

Any number of lines can be drawn on the chart, market is not aware of those and does not care, which one will hold or not , we are never sure, only in hindsight.

But with Taylor's book, there are buying and selling objectives, if these coincide with any other fib levels or pivots, so much the better.

 

Back to markets WHY?

Globex had a run upto 820, a gap up on the day session, allowing a short and a low created before noon, to go long, whatever the market gives, but in accord with the scenarios you laid out.

[WHY? 16]

Today 1-21-09 was a buy day by the "count" we are following. Per Taylor one has an opportunity to go long or short or both if certain conditions are met. Those conditions today were met. The opportunity was there to go long then reverse and go short and cover all before 11 a.m. If one missed the first trip long then one could have shorted and then covered by 11 then reversed and gone long then sold out before the close or even hold for selling early tomm 1-22-09 on any penetration of todays 1-21's high.

 

The interesting thing about Taylor is no moving averages...no stochastics..no indicators at all.....just a following of price action within the framework of a three day cycle that has daily tactics for each day if the cycle. Before the market ever opens you already know what you will do depending on what the markets does as the day unwinds. As Taylor would say we don't make the market; we follow the market and anticipate the market.

 

As Taylor would put it you don't need to hear the news...or the daily "dope" on the markets.

 

Of course, the system requires some tape reading skills for entry and exits but those skills can be learned by most anyone who is willing to learn them.

[monad 10]

WHY?

when you get time Could you look at post 338, just mark yes , no , if no, just a brief comment will do.

that way I know I am on the right track.

thanks.

[BlowFish 10]

Today 1-21-09 was a buy day by the "count" we are following. Per Taylor one has an opportunity to go long or short or both if certain conditions are met. Those conditions today were met. The opportunity was there to go long then reverse and go short and cover all before 11 a.m. If one missed the first trip long then one could have shorted and then covered by 11 then reversed and gone long then sold out before the close or even hold for selling early tomm 1-22-09 on any penetration of todays 1-21's high.

 

 

I am finding the pre 11.00 am stuff a little difficult to see - even with the benefit of hindsight! The SS short day closed strongly down (or weak). Had that not been the case we might have expected a higher open. We got one anyway I could not find where T talked about that specific senario. Price did open up and rally briefly is that the basis for the first long?

 

I do see a buy based on the fact that on the SS day we had a good sell off with close near the low meeting the criteria to be looking to buy at or a little below the SS day?

 

Cheers.

 

Hope

[richbois 10]

I am finding the pre 11.00 am stuff a little difficult to see - even with the benefit of hindsight! The SS short day closed strongly down (or weak). Had that not been the case we might have expected a higher open. We got one anyway I could not find where T talked about that specific senario. Price did open up and rally briefly is that the basis for the first long?

 

I do see a buy based on the fact that on the SS day we had a good sell off with close near the low meeting the criteria to be looking to buy at or a little below the SS day?

 

Cheers.

 

Hope

 

Yesterday we gapped up and then reversed to close gap. Markets tested the SS day lows and as per Taylor, a faillure to take out that low was your signal to go long. At the end of the day we had accomplished the average rally and therefore was a good place to close position as WHY? said. One could have held on overnight for a few points more but would have givend back nice profits if held this the open.

 

Overnight ES hit my Recap MA number of 842.75 and reversed maybe due to the fact that we have 58% chance of making a lower low today. At the moment we have TVGR taking effect so we may need to watch any longs carefully.

[WHY? 16]

WHY?

 

getting back to my post 313, would appreciate if you could spare some time to add/modify etc, for I am really beginning to understand Taylor now, thanks to you. You have dealt with the Buy day.

 

2. SELL DAY: Again both long and short trading possible.

 

a) High made last on Buy day: Look to short on penetration of this high or failure to penetrate.

b) Low made last on Buy day: look for long opportunity at open , however if prices drop below the low then that is B.V and hence the long should not he held too long, target would be around the low of buy day. Next level would be the High of Buy Day if uptrend continues. Many times the prices rise even further and a High is put in last on Sell day.

c) If flat close on Buy Day, again, wait for tests of the low of the buy day before considering long.

 

3. SS DAY: According to Taylor strictly no longs on this trade, however if I understand you guys correctly, both longs and shorts can be considered depending on previous days action.

 

a) High made Last on Sell Day: Look to short on penetration or failure to penetrate.

b) Low made Last on Sell Day: Note if B.V has occurred, then longs can be taken with similar target as that on sell day.

c) Flat close on Sell Day: both longs and shorts possible on open??????

 

In what Taylor termed DAYTRADING these are the strategies and tactics for each day of the cycle.

 

1) On a buy day short and longs are allowed depending on what the market does. Shorts should be covered the same day.

 

2) On a sell day only longs are allowed IF a BV is made early in the session. No shorts on a sell day. Any longs held overnight from the buy day are to be exited on the sell day.

 

3) On a SS day only short selling is allowed. No longs.

 

 

In essence, you have 3 long opportunities and 2 shorting opportunities in the DAYTRADING scheme of things.

 

a) Long on a buy day low made early in the session. Long on a buy day HB or higher bottom in the afternoon (usually best to wait to within an hour or so before the close but is discretionary). Finally, long on a sell day BV made early in the session is permitted however, your exiting point changes to any rally towards the previous days low that gives a profit or a rally towards a penetration of the previous days low.

 

b) Short on a buy day high made first or made early in the session. Should cover the same day. Short on a short sell day on a high made first or early in the session. Cover same day if decline is fast and rapid. May hold on and cover on the low of the next day (buy day) if decline is slow but steady.

 

Swing trading (Taylors 3 day method) and the trend trading (Taylors longer term method) are somewhat different.

 

Hope this helps on the DAYTRADING side of things.

Edited January 23, 2009 by WHY?

[richbois 10]

3) On a SS day only short selling is allowed. No longs.

 

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 atleast the Buy day low, at which point stops have to be thighten.

 

Just my

[WHY? 16]

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 atleast the Buy day low, at which point stops have to be thighten.

 

Just my

Richbois,

Certain abberations in the market cause my software to recycle the 3 day cycle thus causing say a short sell day to become a buy day, Thus allowing for a short or a long. However it only applies to that trading session with any certainty. Generally after one or two sessions the cycle reverts right back to where it was. But, the recycling afforded one the opportunity to say go long on the short sell day when recycling changed the SS day to a buy day.

 

I suspect that your discovery of the positive 3 day cycle caused you to change rules and allow a long on an SS day while my software might would simply re-cycle the day and call it a buy day "for the moment" thus allowing me to go long as you would. The net effect is the same. That is, an opportunity to go long when Taylor would have only allowed a short. Perhaps you and I are simply taking different roads to the same destination???

 

I kept Taylors rules the same but change the day (FOR me it is easier to do it this way) while you change the rules but keep the day with the same name. In the end we both are probally doing the same thing.

 

Of course, the above is just an example. My software may recycle back or forward on either day. For instance, in certain abberrations the sell day may become an SS day or even a buy day. The buy day in turn may become a sell day or an SS day. However, any change in the "count" is generally short lived and only for that trading session.

 

I must say I have come across no one else that understands Taylor as well as you do. If folks want to save the time to learn Taylor I would say they could suscribe to your services and I would imagine they might would get some good insight.

 

I have had my software now for a number of years. It is propietary and I do not know if I will ever get in to selling it or not. I am not sure I want the trouble that would come with selling software and supporting it. You may have the right idea doing things your way.

 

Taylor amazes me the more and more I study and practice his principles.

[HAKUNA 10]

Richbois,

I kept Taylors rules the same but change the day (FOR me it is easier to do it this way) while you change the rules but keep the day with the same name. In the end we both are probally doing the same thing.

 

I must say I have come across no one else that understands Taylor as well as you do. If folks want to save the time to learn Taylor I would say they could suscribe to your services and I would imagine they might would get some good insight.

 

yes besides you, richbois certainly has a good handle on Taylor,and would endorse your take on his subscription service.

 

Hasten to add I am not affiliated with his company but having put in the hard work to understand Taylor, realise that richbois knows what he is talking about.

[Shamal 11]

Richbois,

Certain abberations in the market cause my software to recycle the 3 day cycle thus causing say a short sell day to become a buy day,

The buy day in turn may become a sell day or an SS day.

 

Taylor amazes me the more and more I study and practice his principles.

 

Having studied the posts on this thread and some taylor, I find the following very confusing: both you and richbois have mentioned that the book can be started by taking 10days data and marking the lowest low and go from there.

 

If 3 people started such a book in different days or months they are going to end up calling a particular day either as buy, sell or ssday, hence their strategies will be different for that day.

 

1. How is this going to work out as each has different scenarios to apply.

2. From posts here and in taylor, the market cycles are explained in terms of market manipulation by those who obviously have deep pockets to do that, with the above 3 differing days for each trader, it just doesn't make sense.

 

would be grateful if this can be explained.