Day and swing traders use the Taylor trading technique for several favorite trade setups. Traders take advantage of positioning their trades in sync with the ‘ebb and flow’ of markets identified by the ‘3-day cycle’ of Taylor’s trading method.
George Taylor’s book method, known as the Taylor Trading Technique, captures the ins and outs of ‘Smart Money’ in what can be considered a repeating 3-day cycle. Simply put, Institutional Investors, or ‘Smart Money’, push the markets down to create a buying opportunity and then push the markets up to create a sell opportunity within a 3 day trading cycle.
The ‘3-day cycle’ of the Taylor trading method can be identified as follows:
- Buying day, where the market is reduced to a minimum for a buying opportunity;
- Sell day, where the market is pushed higher to have a chance to sell your long position; Y
- Sell-Short Day, where the market turns down after setting a 3-day high cycle for a Sell-Short opportunity.
Traders take advantage of the 3-day cycle by placing long and short trades in sync with the dynamics of the cycle. The following three favorite trades using the Taylor Trading Technique have been time-tested to give traders a greater chance of success.
The first favorite trade that Taylor Trading Technique uses is to place a long trade at or near the low on the day of purchase, ie the “low on the day of purchase.” A trader will use all his resources to identify the buy day low because, according to Taylor’s trading rules, there is more than an 85% chance that the buy day low will be followed 2 days later by a highest maximum on the market. Sell-Short Day, even in a downtrend market. A trader can successfully close higher on the long trade on the Sell Day (second day of the 3-day cycle) or wait to close on the Short Day (third day of the 3-day cycle) if the markets break. They are in a particularly bullish sentiment. .
The second favorite trade that Taylor Trading Technique uses is to take a long trade on the sell day if the market / trading instrument falls below the low of the previous day’s buy day. According to Taylor’s trading rules, there is a very good chance of at least bouncing back to the buy-day low within the 3-day cycle, offering the opportunity to successfully close higher on the long trade at least on the day of the short sale.
The third favorite trade that Taylor Trading Technique uses is playing the market / trading instrument for a short trade. According to the ‘3-day cycle’, the market is driven lower after setting the high on the short sale day, that is, the high on the short sale day. Therefore, if the market closes near the short day high, the market may have a gap above the short day high at the open of the buy day. According to Taylor’s trading rules, there is a very good chance of at least going back to the short day high on the way to setting the buy day low, which offers an opportunity to successfully close the trade. short on the day of purchase.
Of course, a trader must assess other underlying market / trading instrument dynamics before considering whether a long or short trade is warranted. The trader wants to place a trade that has the best chance of success in the shortest time possible. Therefore, it is logical to think that other sentiment indicators should be aligned with the decision to trade long or short term.
For example, the trader should consider placing the trade, be it long or short, that is in sync with the prevailing short-term trend of the market / trading instrument. If the short-term trend is positive, then the trader should focus on those opportunities that favor long trades; If the short-term trend is negative, then the trader should focus on opportunities that favor short trading.
Additionally, evaluating the Elliott Wave patterns of the market / trading instrument is beneficial in determining the potential for short-term bullish or bearish momentum. The trader may be more aggressive short when the market / trading instrument is embedded in a descending Elliott wave pattern, but on the other hand, may be more willing to go long more aggressive when the market / trading instrument it is in an ascending Elliott wave pattern.
In either case, a trader can decide to trade long or short within the 3-day cycle of the Taylor trading method by considering the following simple rules:
- If the market / trading instrument is trending up, then a stronger long trade can be considered because, relative to the 3-day cycle of the Taylor trading method, higher short-day trading highs are being made at relative to lower purchase day minimums.
- If the market / trading instrument is trending down, then a stronger short trade can be considered because, relative to the 3-day cycle of the Taylor trading method, the lower buy-day lows are falling. doing relative to the highs of the dull short sale days.
- If the market / trading instrument is trending sideways, then both long and short trades can be considered because, relative to the 3-day cycle of the Taylor trading method, the difference between the buy-day lows and the trade-day lows Short day highs remain relatively constant with each other. .
Traders find Mr. Taylor’s “book method” as relevant in today’s markets as they did when it was first introduced in the early 1950s. Although the speed of trade execution has increased tremendously, Human nature of operations in sync with the prevailing trend has not, and is still the best attack and defense of the operator when operating in conjunction with the ‘Smart Money’.