Although I’ve been learning and using the Taylor Trading Technique for about 15 years, there are plenty of times when I’m not clear on what phase of the TTT cycle a market is in. If I went back and reread Taylor’s book again I could probably understand some of the days that aren’t clear to me.
However, I think there are two main paths that a trader can take to improving his results (at least in the way I look at trading). First, you can either gain a deeper understanding of one (or just a few) markets then learn how to trade the chosen market under a wider variety of conditions. This is what I would do if I were to reread Taylor. Many newer futures traders choose this route, either out of early education and experience to a given market (took a course, following an advisory) or lack of knowledge / fear of other markets.
The other major path to improving one’s trading is to take a smaller number of trading methods and/or setups and apply those setups to a broader number of markets. This approach requires that you have a good understanding of a larger number of markets (never trade a market or system you don’t fully understand), but monitoring a larger number of markets and applying the same methods to more markets helps you pick trades with better odds for success rather than taking marginal, low odds trades.
For an example I thought I’d compare gold and eMini S&P futures for today. Let’s look at gold first. On the daily chart below I’ve marked up the likely recent cycle. Thursday was a Buy day – an early session selloff (low violation) then a rally back over the previous session low, with the close ending higher than the open. This meant we would anticipate a Sell day on Friday. Had this been the case, we would have seen it close toward the high end of the range on Friday, setting up a high test for a Sell Short day today.
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As it turned out, it closed toward the lower end of the range and the close was lower than the open. This made it difficult to envision today as a Sell Short day, where we would expect a test of the previous day high as a setup for a short entry. On the other side, today there has been no test of Friday’s low to signal the low violation that would set up a Buy day today. With there no clear pattern for today, this was one of those days where the best position is no position. As of mid-session today I would expect a narrow trading range today that will yield a breakout set for Tuesday, so gold may end up with a good trade tomorrow.
Looking at the daily eMini S&P futures chart below, Thursday’s and Friday’s bars look much the same as gold’s pattern. The one difference, which turned out to be crucial, was that Friday’s close was near the bottom of the range. This made it easier for it to have the low violation and reversal that we anticipate on a Buy day. The reversal back above Friday’s low at 1330.50 was the long entry trigger for the eMinis this morning, and thus far there’s been a good Buy day rally from that entry.
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When I started in the futures business one of my mentors used to tell me that “sometimes the best trade is no trade”. By watching a wider number of markets it’s easier to find good setups and avoid taking marginal setups in a smaller universe of potential trades.
This is a sample of the analysis from my Swing Trader’s Insight advisory service. For information on STI, and to sign up for a free two week trial, visit here.
The information contained here includes information from sources believed to be reliable and accurate, but no guarantee is made as to accuracy, nor do they purport to be complete. Opinions are subject to change without notice. Past performance is not necessarily indicative of future performance. The risk of loss in trading futures contracts or commodity options can be substantial, and therefore investors should understand the risks involved in taking leveraged positions and must assume responsibility for the risks associated with such investments and for their results.
