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Home / Futures Blog / Taylor Trading Buy Day in T Bond Futures

Taylor Trading Buy Day in T Bond Futures

October 25, 2016 by Scott Hoffman

Yesterday I wrote about how, using the Taylor Trading Technique (TTT) we identified and traded a down move in Treasury bond futures. The TTT anticipated a rally in T bonds today; this gave us a new trade opportunity today.

The Taylor Trading Technique describes a cyclicality where a market makes a low and rallies, then tops out and sells off over a number of days. This cycle recurs repeatedly in discrete stages so if we can identify a given day’s structure then we can anticipate the market’s likely action for the following day. The Treasury bond futures have been a good example of the rhythm described by the Taylor Trading method.

Yesterday the Treasury bond futures sold off out of as breakout setup (I wrote about that HERE). A downside breakout day is analogous to a Taylor Trading Sell short day- a session where the market opens near the top of the day’s range and then moves lower over the course of the session, closing near the session low.

zbz-daily-oct-25

In the Taylor Trading cycle, a Sell Short day is followed by a Buy day so that’s what we anticipated for today. (The Taylor Trading labels aren’t infallible. They tell us what to expect however we only act when the market actually does do what we anticipate.)

For a Taylor Trading Buy day, we look for an early move down- a textbook Buy day has a move below the previous day low. This move lower is actually a fake out, pushing out weak longs and encouraging shorts to sell at the bottom.

We then look for the market to bottom out and turn higher. The move above the previous day low is our signal to go long. From here we look for the market to move higher over the session.

Today’s intraday bond is below. Although the low penetration and buy signal occurred before I’m normally in the office trading, I thought I would use it as an example because the past two days are a good example of the Taylor Trading rhythm and bonds were a textbook Buy day today, even if the buy signal occurred early.

zbz-intraday-oct-25

Although the Taylor Trading Technique doesn’t provide every minute detail of managing a trade, it does provide traders with two valuable things. First, it helps you anticipate a market’s likely directional bias for a session. Second, it gives you at least one trade setup to look for and act on when the market does what we anticipate.

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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

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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