I use the Taylor Trading Technique (TTT) for much of the analysis for my Swing Trader’s Insight advisory. The TTT attempts to anticipate a market’s direction for a trading session and then trade accordingly; there was a good TTT trade today in the copper futures.
Yesterday I wrote about a breakout setup trade in the Euro (read it HERE). When we’re trading a breakout setup, we don’t try to pick a direction, we let the market decide where it wants to go and we go along with it.
Breakout setups tend to be inflection points; they tend to occur when a market is indecisive as to the direction of the next market move. This indecision is both a reason to not pick a direction as well as the reason breakout moves are often explosive- the change from indecision to bullish or bearish sentiment creates a positive feedback loop as opinion coalesces.
When markets don’t have breakout setups (which is most of the time) I use the Taylor Trading Technique (TTT) for my Swing Trader’s Insight advisory. The TTT does attempt to anticipate a market’s likely direction for a session, based on the market’s direction over previous sessions. I explain the TTT more in depth in the user’s manual for Swing Trader’s Insight, which you can request HERE.
I send out STI at night, giving the pattern I anticipate for the upcoming session for 23 futures markets. There isn’t always a clear signal for every market for every day, and obviously markets don’t always do what we anticipate, so we skip the markets that don’t have a clear setup or do something other than what was anticipated. From this, 23 markets get whittled down to a couple of tradable markets for a given session.
In last night’s Swing Trader’s Insight I labeled the December copper futures as having a TTT Sell Short day for today. This meant we would look for a rally above the previous day high, our reference price. We anticipate this rally will fail and turn lower as a selloff begins. The move below the previous day high / reference price is our trigger for a short sale. From here we look for the market to trend lower over the course of the session.
Above is the daily chart for Dec. copper. Copper had a breakout setup Wednesday that resulted in a breakout rally on Thursday. Thursday’s breakout rally meant we anticipated a TTT Sell Short day for Friday, with Thursday’s 2.4050 high as our reference price for the Sell Short day trade.
The initial move above the reference price occurred a little before 6:15 AM (see the intraday chart below). This move above the reference price gave us a heads up to look for a reversal back below that level, which would be our short entry signal.
After reaching a session high of 2.4180 the market broke back below our reference price about 10 minutes later, triggering the first short sale. The initial stop loss would go above the 2.4180 session high- our sale was predicated on the market trending lower; if it rallied up to take out the high we would want to exit the trade, take our loss and look for another trade.
The stop loss level was significant because if you missed the first short, a second move above the reference price around 7 AM gave a second short sale opportunity. This second signal could be taken with confidence as the second move made a lower high, a sign of waning bullishness.
Copper trended lower through the morning, breaking below the 2.3840 overnight low about 8:40 and Thursday’s 2.3550 low about 10 minutes later. Stops could be trailed lower over the morning as the market moved lower- holding below the 20 period EMA (green line) indicated the strength of the down trend.
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.
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.