The Taylor Trading Technique is based on the concept that markets move in cycles; that a move in one direction will be followed be a reactive move in the opposite direction. Knowing this can allow us to anticipate what a market may be likely to do on a given day.
On Tuesday the Canadian Dollar futures had a breakout rally- it made an early session move above the previous day high, which led to a rally over the course of the session, ending with a close near the daily high. This meant for Wednesday we would anticipate a Sell Short day- an early session rally above the previous day high that would fail and in turn see a selloff over the balance of the session.
When I was writing this morning’s Swing Trader’s Insight watch list the market had already made a failed rally, moving above 74.725 to make an overnight double top of 74.76. I suggested we could look to wait for another move above the Tuesday high or a break of the session low of 74.45.
We got the rally first, rallying to 74.745 around 8:30 AM. This was both above the Tuesday high yet short of the overnight high; both good evidence for a sale. The failure of this rally gave us our sell signal. Our initial stop loss could go above the overnight high of 74.76, so we would close out the trade if it made a new session high.
The market moved lower in a “Three Pushes” pattern, making a session low of 74.27 around 11:30. This low held for the next hour, giving a signal to cover shorts (You could consider re shorting if it broke below this low.)
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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