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Home / Futures Blog / The Taylor Trading Technique and Today’s Rally in eMini SP Futures

The Taylor Trading Technique and Today’s Rally in eMini SP Futures

August 8, 2014 by Scott Hoffman

In this morning’s Swing Trader’s Insight watch list, my comment for the eMini S&P futures was: “It looks like we have a “cover breakout sales” day so a Taylor Trading Technique Buy day is in order.”  (Read that HERE).  Let’s take a look at the why (if you’re a TTT follower you might be asking this) and how you could trade it.

A strict count of the Taylor Trading Technique cycle would have today as the Sell Short day, following Wednesday’s Buy day (which I wrote about HERE). From there, the TTT would have a Sell day for Thursday and a Sell Short day for today.

Over the years I’ve talked to a number of traders who use the TTT to trade. A number of them have had a better understanding of the intricacies and details of the TTT; many know it better than I. However, this doesn’t necessarily make them better traders. Some of these traders adhere so closely to the rules that the rigidity of their thinking makes it difficult to use it in real world trading.

Following rules too strictly is like the difference between knowing the words of a foreign language and being able to speak it fluently. You become fluent by learning nuances and idioms; likewise, one path to successful trading is to learn how to be flexible in your thinking and analysis.

In last night’s Swing Trader’s Insight I listed the eMini S&P as a Sell Short day. (In my defense, I put a question mark after the SS day for the NASDAQ and I listed the eMini Russell as a Buy day). Then this morning I changed my call to a TTT Buy day.

Two points to be made here. First, I changed my call because that’s what the evidence said to do- overnight there was a move below the previous day low and by this morning it was trending higher. (In this context, you could view Wednesday as a breakout setup with Thursday the downside breakout out of it. That’s where the morning watch list comment came from).

The second point to make is that I’ve come to prefer to wait for the 8:30 AM CT open to trade. The premarket hours often see more fake out moves, and as the TTT generally looks for one trade per market per session, it makes sense to wait for the better setups we often see a little later into the morning. Premarket trade is still often useful; we can often use overnight highs and lows as additional TTT reference prices, something I’ve written about previously.

By the 8:30 open it was likely we weren’t going to get the “low violation” buy of a standard TTT Buy day entry, and the market had rallied enough that a trip back to Thursday’s low might just keep a selloff going. The bullish action meant we would want to look for alternate long entries in order to get long when we were confident the market was moving higher.

ESU intraday Aug 8

Two setups stuck out for me this morning. First, around 8:45 it made a day session low at 1904.25. It then successfully tested this low around 9:30 AM. This successful test was a buy signal in a lower timeframe version of the “low violation” buy of a TTT Buy day.

The second entry would be on a rally above the Fibonacci retracement level at 1913.88 (especially after the overnight high was 1913.75, just below that resistance). This resistance was taken out first around 10:30 AM and then for the final time around Noon CT.

For the first entry, the stop could go below the day session low of 1903.75. By the time it got to the Fib level entry I would want a tighter stop- I like the EMA that is on the intraday chart (it’s the 60 period EMA of 5 minute bars; I use it as a proxy for a different EMA I like to use that won’t display on my quote service).

We’ve seen a good extension of the rally this afternoon. Today shows the logic of the TTT- looking for on good trade setup and then trying to patiently stay with the trade as long as the market is heading in our favor. The next target for today’s rally would be Thursday’s high of 1925.75.

Swing Trader's Insight Essential Reference Guide Cover

Essential Guide for Futures Swing Trading

In this guide, experienced trader and broker Scott Hoffman explains the trading methods he uses to analyze and trade the futures markets and to publish his trade advisory, Swing Trader’s Insight.

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Risk Disclosure

IT MAY NOT BE POSSIBLE TO LIMIT LOSSES TO THE EXACT LOSS LIMIT DEPENDING UPON MARKET CONDITIONS AND THE POSSIBILITY OF LIMIT MOVES.

This material is conveyed as a solicitation for entering into a derivatives transaction.

This material has been prepared by a Daniels Trading broker who provides research market commentary and trade recommendations as part of his or her solicitation for accounts and solicitation for trades; however, Daniels Trading does not maintain a research department as defined in CFTC Rule 1.71. Daniels Trading, its principals, brokers and employees may trade in derivatives for their own accounts or for the accounts of others. Due to various factors (such as risk tolerance, margin requirements, trading objectives, short term vs. long term strategies, technical vs. fundamental market analysis, and other factors) such trading may result in the initiation or liquidation of positions that are different from or contrary to the opinions and recommendations contained therein.

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.

Trade recommendations and profit/loss calculations may not include commissions and fees. Please consult your broker for details based on your trading arrangement and commission setup.

You should carefully consider whether such trading is suitable for you in light of your circumstances and financial resources. You should read the "risk disclosure" webpage accessed at www.DanielsTrading.com at the bottom of the homepage. Daniels Trading is not affiliated with nor does it endorse any third-party trading system, newsletter or other similar service. Daniels Trading does not guarantee or verify any performance claims made by such systems or service.

Filed Under: Swing Trader's Insight

About Scott Hoffman

Scott graduated from the University of Chicago in 1986 with a degree in Economics. After graduation, Scott worked on the floor of the Chicago Mercantile Exchange then moved upstairs, serving as the personal broker to a former chairman of the Chicago Board of Trade. There, he worked as a broker and margin manager, starting up the firm’s full service brokerage division.

Today, Scott serves as an educator and mentor for new traders, and as a trading partner and ally for experienced traders. The breadth and depth of Scott’s knowledge make him the “go to guy” for both retail and institutional traders.

Scott also publishes two futures advisories, Swing Trader’s Insight and Trade or Fade. He also writes the futures trading blog at www.futuresinsightblog.com. Scott has written articles for a number of futures publications and has done numerous futures trading seminars, including seminars for both the CBOT and CME.

Scott offers his customers the knowledge he has gained from his more than 25 years of experience in the futures business. Scott is accepting new clients at this time.

Scott lives in suburban Chicago with his wife and three children. In his free time he enjoys coaching his children’s sports and various other athletic activities.

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Risk Disclosure

This material is conveyed as a solicitation for entering into a derivatives transaction.

This material has been prepared by a Daniels Trading broker who provides research market commentary and trade recommendations as part of his or her solicitation for accounts and solicitation for trades; however, Daniels Trading does not maintain a research department as defined in CFTC Rule 1.71. Daniels Trading, its principals, brokers and employees may trade in derivatives for their own accounts or for the accounts of others. Due to various factors (such as risk tolerance, margin requirements, trading objectives, short term vs. long term strategies, technical vs. fundamental market analysis, and other factors) such trading may result in the initiation or liquidation of positions that are different from or contrary to the opinions and recommendations contained therein.

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.

Trade recommendations and profit/loss calculations may not include commissions and fees. Please consult your broker for details based on your trading arrangement and commission setup.

You should carefully consider whether such trading is suitable for you in light of your circumstances and financial resources. You should read the "risk disclosure" webpage accessed at www.DanielsTrading.com at the bottom of the homepage. Daniels Trading is not affiliated with nor does it endorse any third-party trading system, newsletter or other similar service. Daniels Trading does not guarantee or verify any performance claims made by such systems or service.

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