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    The document discusses the Taylor Trading Technique and provides guidelines for using it. Some key points include: 1) The technique follows a basic 1-2-3 day cycle of buying on the first day, selling on the second, and looking to short on the third. 2) Rules are provided for identifying buy days, sell days, and sell short days based on the market's behavior and closing prices. 3) Additional concepts discussed include using indicators like rate of change and moving averages to help time entries. Patterns like triangles and pinballs are also mentioned. 4) Guidelines emphasize focusing on the previous day's high and low as objective points for entries and exits. The overall approach is

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    The+Taylor+Trading+Technique+ +raschke+ +rev+2

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    The document discusses the Taylor Trading Technique and provides guidelines for using it. Some key points include: 1) The technique follows a basic 1-2-3 day cycle of buying on the first day, selling on the second, and looking to short on the third. 2) Rules are provided for identifying buy days, sell days, and sell short days based on the market's behavior and closing prices. 3) Additional concepts discussed include using indicators like rate of change and moving averages to help time entries. Patterns like triangles and pinballs are also mentioned. 4) Guidelines emphasize focusing on the previous day's high and low as objective points for entries and exits. The overall approach is

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    The document discusses the Taylor Trading Technique and provides guidelines for using it. Some key points include: 1) The technique follows a basic 1-2-3 day cycle of buying on the first day, selling on the second, and looking to short on the third. 2) Rules are provided for identifying buy days, sell days, and sell short days based on the market's behavior and closing prices. 3) Additional concepts discussed include using indicators like rate of change and moving averages to help time entries. Patterns like triangles and pinballs are also mentioned. 4) Guidelines emphasize focusing on the previous day's high and low as objective points for entries and exits. The overall approach is

    Copyright:

    © All Rights Reserved
    Download as PPT, PDF, TXT or read online from Scribd
    Download as ppt, pdf, or txt
    4K views25 pages

    The+Taylor+Trading+Technique+ +raschke+ +rev+2

    Uploaded by

    jag_pag
    The document discusses the Taylor Trading Technique and provides guidelines for using it. Some key points include: 1) The technique follows a basic 1-2-3 day cycle of buying on the first day, selling on the second, and looking to short on the third. 2) Rules are provided for identifying buy days, sell days, and sell short days based on the market's behavior and closing prices. 3) Additional concepts discussed include using indicators like rate of change and moving averages to help time entries. Patterns like triangles and pinballs are also mentioned. 4) Guidelines emphasize focusing on the previous day's high and low as objective points for entries and exits. The overall approach is

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    © All Rights Reserved
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    The passage discusses the Taylor Trading Technique and different ways it can be applied, including following it literally, using parts of the methodology, trading only selective plays, and using it as a basis for developing other systems.

    The passage lists six ways one can use the Taylor Trading Technique: 1) follow it literally, 2) follow the basic methodology with discretion, 3) trade only selective plays, 4) use it for accumulation/distribution in trend and swing trading, 5) use it as a basis for developing mechanical systems, and 6) practice it to develop superior entry/exit techniques.

    The main concepts discussed are trading within a 2-3 day timeframe, watching price action around previous highs and lows, monitoring swing patterns, determining the trend or test for the day, ignoring news/fundamentals and focusing on price action, and being aware of longer-term structures while trading short-term.

    The Taylor Trading Technique

    With Linda Raschkes Variations on the theme

    Six Ways to Use Taylors Method


    1. 2. 3. !. &. Follow the system literally in exact detail (and make a viable living). Follow the basic methodology with discretion. Trade selective plays only. "se #or acc$m$lation%distrib$tion in trend trading and intermediate swing trading. "se as a depart$re point in developing short term mechanical systems.
    a) b) c) 'rice 'attern (ange expansion systems 2 )ay (*+

    ,. 'ractice as a way to develop s$perior entry%exit techni-$e.

    .ain +oncepts
    Trade within a 2/3 day time #rame 0atch price action aro$nd previo$s day1s high or low .onitor the length o# the last $pswing relative to the last downswing (,2 and 122 min$te charts are optim$m) )etermine what the play is #or the day 3 i.e.4 the trend #or the day or the test #or the day. 5gnore all news and #$ndamentals. Foc$s on tape action. 6ltho$gh trading on a 1/2 day basis4 be aware o# the bigger pict$re 3 the longer price str$ct$re4 )on1t take co$ntertrend trades within the #irst 3 days o# a breako$t #rom a chart #ormation.

    The +lassic +ycle


    7'lays7 8 (Taylor ($les #or each +ycle )ay)
    3 9$y )ay
    :ow First 9ig (ally Flat +lose

    3 3 3 3

    9$y )ay :ow ;iolation <elling )ay


    Flat *pening )own *pening =igh First 9ig )ecline

    <hort <ale )ay <hort <ale )ay <hort <ale on 9$y )ay =igh First 9ack to 9asics 8 tape reading4 vol$me4 and > retracements

    ($les and Tools


    3

    5deal 3/& )ay +ycle


    The .ethod provides a game plan #or every day.
    3 76 trader who knows how to act when the expected happens4 is in a better position to act when the $nexpected happens7. 3 3 3 6 9$y )ay (yo$ go long)A 6 <ell )ay (yo$ exit yo$r longs #rom the previo$s day)A and 6 <ell <hort )ay ( yo$ look to go short by #ading the last bit o# the rally which began on the 9$y )ay).

    <tocks ? commodities tend to #ollow a repetitive 3/& day cycle consisting o#@

    6#ter the <ell <hort )ay4 the cycle repeats itsel#4 starting with a new 9$y )ay on which yo$ cover yo$r shorts and look to go long. This is the 7ideal7 cycle. 5n a trending market there is sometimes an extra day or two inserted on the long or the short side.

    9asic 'rinciples
    6 trader m$st rely on his%her own B$dgment. :istening to others will not give yo$ an edge b$t rather will serve as a distraction.

    The Classic Cycle


    The market has a de#inite 1/2/3 rhythm4 with at times an extra 1/2 beats. The market goes $p 1/2/3 days and reacts4 the !th and &th #ig$re is the variation when it r$ns that extra day or 2 in a trend. <tart with three days as o$r trading cycle. 0e $se the #irst day #or b$ying and the 2nd and 3rd day #or selling.

    Daily Focus
    Cach day the main #oc$s is on the 7*bBective levels7 / the previo$s dayDs high and low. The 9ook .ethod trader places his orders 7at the market7. )onDt limit yo$r orders. Trading ranges have the most mechanical acc$m$lation and distrib$tion rhythm.

    Objective oints
    *bBectives #or a trade are the resistance that comes in aro$nd the 'revio$s )ayDs high4 and the s$pport that comes in at or aro$nd the 'revio$s )ayDs low.
    3 "ntil a trader gains in experience4 b$y to cover or sell to exit B$st as the obBectives are reached. 3 Think only abo$t exiting yo$r trade as an obBective area is approached. 3 Tho$gh *bBectives may seem conservative4 remember that the trader will get 'ositive slippage. 3 5n stronger trends4 allow #or deeper penetration o# the obBective point.

    FORGET ABOUT A TRADE AFTER YOU HAVE MADE IT!

    !ules "or a #uy Day


    6nticipate a 9$y )ay a#ter one to two consec$tive down closes. 5n an $p/trend4 a 9$y )ay might occ$r a#ter only 1 down close. 6 9$y )ay can also occ$r a#ter B$st one4 wide/ranging down day s$ch as an o$tside down day in a congestion area. 0atch #or the market to open and test the previo$s dayDs low #or s$pport.

    The ideal #uy Day includes$


    3 3 3 6 test o# the previo$s dayDs low that #inds s$pport. :ows made in the morning and high made in the a#ternoon. 6 close in the $pper end o# the daily range.

    !ules "or a #uy Day %Cont&


    'o (ong on a test o" the )revious day*s lo+, *nce a long is entered4 the low #or the day sho$ld be considered a s$pport level. 6 stop sho$ld be placed beneath this area. -old Overnight$ 5# the trade is going to close with a pro#it4 it sho$ld be held overnight. Cxit the position on the next day on any #ollow thro$gh moment$m. 5# price p$shes too m$ch below the previo$s dayDs low on a 9$y )ay morning be#ore #inding temporary s$pport4 the obBective #or the long trade is the previo$s dayDs low. 5# the market is closing 7#lat7 or $nchanged4 it indicates #$rther weakness. .xit (ong )ositions be"ore the close.

    !ules "or a #uy Day %Cont&


    Sa/e Day .xit$ 0hile the intent is to hold yo$r position overnight4 yo$ sho$ld exit positions on the same day i# the market has an extremely #avorable move4 handing yo$ a wind#all pro#it. (arge O)ening 'a) Do+n$ 5# a 9$y )ay is expected b$t there is a large opening gap down below the previo$s dayDs low4 (9$y )ay :ow ;iolation) b$y at the #irst signs o# s$pport and look to exit on a reaction back $p towards yesterdayDs low. (arge O)ening 'a) U)$ 5# a 9$y )ay is expected4 b$t the market gaps $p by a large amo$nt4 there is risk that the high can be made #irst and the market will trade down #rom the opening price #or the rest o# the session (9$y )ay =ighs .ade First). 5n this case4 a trader can look #or the short sale #irst.

    Sell Day
    *nce a long position is established4 yo$r goal is to exit on any #ollow/thro$gh the next day. The previo$s dayDs action indicates the most probable opening move. 5# the 9$y )ay #inished with a strong close $p contin$ed strength the next morning. 5n a strong $p trend4 an $pside penetration o# the previo$s dayDs high can be expected. )o not stay in a position that is acting opposite to what yo$ anticipated.

    Sell Short Day


    6#ter the market has rallied #or two to three days4 the short term $p cycle sho$ld be close to exha$sting itsel#. 6 7<ell <hort )ay7 will normally #ollow a <ell )ay. The same characteristics o# a 9$y )ay will be #o$nd on the <ell <hort )ay only in reverse.

    3 The ideal <ell <hort )ay will open $p #rom the previo$s dayDs close4 make its high #irst and its low last4 and close in the lower end o# its range. 3 6 weak close on a <ell <hort )ay indicates #$rther weakness and an opport$nity to cover short positions the next day.

    Sell Short Day %Cont&


    5# price rallies sharply above the previo$s dayDs high be#ore #inding resistance4 the obBective #or the short trade becomes a reaction back towards the previo$s dayDs high. 5n this case4 the trade sho$ld be exited on the same day. 5# yo$ are expecting a <ell <hort )ay b$t the market opens way down and #inds s$pport4 the possibility exists that a rally may ens$e4 and the high wo$ld be made last4 indicating #$rther strength. 0ait and p$sh the <ell <hort )ay ahead to the next day. Then look to short a test o# the previo$s dayDs high $sing the same r$les.

    Sell Short Day %Cont&


    5# the market has B$st given a big decline4 the shorts will be in no h$rry to cover. *#ten4 a#ter a bit o# time4 the market can recover with activity. 6 <ell <hort )ay that has a #ast decline and then rallies back #orming a 7; Cxpect a higher opening and a higher low on the reaction #or the 9$y )ay.

    rice atterns
    The 2/)ay (ate o# +hange ((*+) is a $se#$l tool which dovetails well with TaylorDs in one day o$t the next techni-$e. The 2/period (*+ indicates whether the odds #avor being a b$y or a seller #or the next day.
    3 =old the trade overnight and exit according to his g$idelines.

    rice atterns
    Three bar Triangle brea0out )attern@ 'rice has a lower high then the 2 day high and a higher low then the two day low with a narrowing o# the ranges. inball$ 6 3/period (<5 o# the 1/day (*+ has a reading o# above ,E or below 33.
    3 :ook #or b$ys when price is above the 22/period C.6 and #or sells when price is below the 22/period C.6.

    inball1$ 'rice has p$lled completely away #rom a &/ period simple moving average indicating moment$m. The #irst close in the opposite direction on the other side o# a ! <.6 sets $p a pinball sell. 2 SM3$ 'rice closes above a & <.6 #or EF bars.

    3 The #irst close on the opposite side sets $p a 9$ying opport$nity.

    Basic Flips
    There is a small positive expectation across all markets when entering 7long market on close7 on the day the 2/period (*+ #irst #lips $p and exiting on the next dayDs close. The (*+ indicator t$rns $p or down every 2 1%2 days on average. The 2/period (*+ has better statistical expectation than either a simple price change (1/ period (*+) or a longer term oscillator s$ch as a moving average oscillator.

    Short Term Anti


    6n 76nti7 trade occ$rs when the slopes o# two oscillators which have di##erent time #rames4 are in opposition to each other. 0ait #or the 2/period (*+ to correct two days in the opposite direction o# the slope o# an intermediate oscillator / 5 $se the 1, period <.6 o# the 3%12 oscillator. The best trades occ$r when the slope o# the longer/term indicator has B$st t$rned. The choicest trades appear as a small sho$lder or a 1/2 day dri#t pattern.

    RO Di!er"ence
    5t is a reversal pattern. )onDt look #or this in the strongest trending markets. The ideal time window is &/days b$t this pattern can #orm over ! or , days. 5# the pattern does not work within 1/2 days4 the primary trend is going to reassert itsel#G

    4olatility #rea0out Syste/s


    6 > o# the previo$s dayDs range or a > o# the previo$s H/bar range is added or s$btracted to the closing price or the next dayDs opening price. This level is $sed as a b$y or sell stop to enter in the direction the market is moving. Cxit on next dayDs open%close or an 6T( #$nction. (isk n> 6T(.

    Using T5C6S +ith Mar0et Ti/ing and Taylor Trend "or the Day7
    Think o# Ticks as correlating +ith the strength o" buy or sell )rogra/s. Ticks can be $sed as a /o/entu/ indicator or an 7overbo$ght%oversold7 indicator in a trading range environment. Ticks represent how m$ch buying or selling )o+er has been $sed to p$sh the market $p or down on a partic$lar swing. Ticks m$st be watched with respect to overall market tone or type o# environment (trading range or trending). Ticks can be $sed in a countertrend manner by looking to #ade the extreme readings when in a trading range. Ticks have an u)+ard bias and are highly correlated with market breadth. Ticks #$nction as a con"ir/ation8non9con"ir/ation indicator. 5# the market makes a new high4 the ticks sho$ld also make a new high. The market alternates between a trending and a consolidation mode. The day #ollowing a trend day or wide range day tends to be a partic$larly good one #or $sing the tic0s in a countertrend /ode,

    Using T5C6S +ith Mar0et Ti/ing and Taylor Trend "or the Day7
    Trend Day$ Ticks reaching extreme readings on a single day indicate a trend day. There are good odds o# #ollow/thro$gh the next morning a#ter a day where the ticks hit F%/ 1222 in the a#ternoon. #uy on ullbac0s$ 5# Ticks make new highs above F1222 a#ter 12 6.4 look to b$y the #irst p$llback. 5# they make new =5I=< a#ter 2 '.4 b$y the #irst p$llback. 6n extreme tick reading in the #irst 32 min$tes sho$ld be -$estioned. .xtre/e Tic0 !eadings$ .xtreme tick readings between 12 / 12 C<T indicate that the market may res$me the trend in the a#ternoon4 $s$ally a#ter a mid/day consolidation. 5# ticks do not make new highs (or lows when in a downtrend)4 then the a#ternoon leg will not have any #ollow/ thro$gh. Cxtremes Tick readings in the a#ternoon #avor a market #ollow/thro$gh into the next day. 5# price rises and #alls as the tick rises and #alls4 the day sho$ld be a normal trading day. 5# the market has had a strong trend the day be#ore4 the odds o# having morning #ollow thro$gh are very high.

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