The Taylor Trading TechniqueWith Linda Raschkes Variations on the theme

Six Ways to Use Taylors MethodFollow the system literally in exact detail (and make a viable living).Follow the basic methodology with discretion.Trade selective plays only.Use for accumulation/distribution in trend trading and intermediate swing trading.Use as a departure point in developing short term mechanical systems.Price PatternRange expansion systems2 Day ROCPractice as a way to develop superior entry/exit technique.

Main ConceptsTrade within a 2-3 day time frameWatch price action around previous days high or lowMonitor the length of the last upswing relative to the last downswing (60 and 120 minute charts are optimum)Determine what the play is for the day i.e., the trend for the day or the test for the day.Ignore all news and fundamentals. Focus on tape action.Although trading on a 1-2 day basis, be aware of the bigger picture the longer price structure, Dont take countertrend trades within the first 3 days of a breakout from a chart formation.

The Classic Cycle"Plays" (Taylor Rules for each Cycle Day) Buy DayLow FirstBig RallyFlat CloseBuy Day Low Violation Selling DayFlat OpeningDown OpeningShort Sale Day Short Sale Day High First Big Decline Short Sale on Buy Day High First Rules and Tools Back to Basics tape reading, volume, and % retracements

Ideal 3-5 Day CycleThe Method provides a game plan for every day. "A trader who knows how to act when the expected happens, is in a better position to act when the unexpected happens".Stocks & commodities tend to follow a repetitive 3-5 day cycle consisting of:A Buy Day (you go long); A Sell Day (you exit your longs from the previous day); and A Sell Short Day ( you look to go short by fading the last bit of the rally which began on the Buy Day).After the Sell Short Day, the cycle repeats itself, starting with a new Buy Day on which you cover your shorts and look to go long.

This is the "ideal" cycle. In a trending market there is sometimes an extra day or two inserted on the long or the short side.

Basic PrinciplesA trader must rely on his/her own judgment. Listening to others will not give you an edge but rather will serve as a distraction.

The Classic CycleThe market has a definite 1-2-3 rhythm, with at times an extra 1-2 beats.The market goes up 1-2-3 days and reacts, the 4th and 5th figure is the variation when it runs that extra day or 2 in a trend. Start with three days as our trading cycle. We use the first day for buying and the 2nd and 3rd day for selling.

Daily FocusEach day the main focus is on the "Objective levels" - the previous day's high and low. The Book Method trader places his orders "at the market". Don't limit your orders. Trading ranges have the most mechanical accumulation and distribution rhythm.

Objective PointsObjectives for a trade are the resistance that comes in around the Previous Day's high, and the support that comes in at or around the Previous Day's low. Until a trader gains in experience, buy to cover or sell to exit just as the objectives are reached. Think only about exiting your trade as an objective area is approached. Though Objectives may seem conservative, remember that the trader will get Positive slippage. In stronger trends, allow for deeper penetration of the objective point.

FORGET ABOUT A TRADE AFTER YOU HAVE MADE IT!

Rules for a Buy DayAnticipate a Buy Day after one to two consecutive down closes. In an up-trend, a Buy Day might occur after only 1 down close. A Buy Day can also occur after just one, wide-ranging down day such as an outside down day in a congestion area.Watch for the market to open and test the previous day's low for support.

The ideal Buy Day includes:A test of the previous day's low that finds support.Lows made in the morning and high made in the afternoon.A close in the upper end of the daily range.

Rules for a Buy Day (Cont)Go Long on a test of the previous day's low. Once a long is entered, the low for the day should be considered a support level. A stop should be placed beneath this area.Hold Overnight: If the trade is going to close with a profit, it should be held overnight. Exit the position on the next day on any follow through momentum.If price pushes too much below the previous day's low on a Buy Day morning before finding temporary support, the objective for the long trade is the previous day's low. If the market is closing "flat" or unchanged, it indicates further weakness. Exit Long positions before the close.

Rules for a Buy Day (Cont)Same Day Exit: While the intent is to hold your position overnight, you should exit positions on the same day if the market has an extremely favorable move, handing you a windfall profit. Large Opening Gap Down: If a Buy Day is expected but there is a large opening gap down below the previous day's low, (Buy Day Low Violation) buy at the first signs of support and look to exit on a reaction back up towards yesterday's low. Large Opening Gap Up: If a Buy Day is expected, but the market gaps up by a large amount, there is risk that the high can be made first and the market will trade down from the opening price for the rest of the session (Buy Day Highs Made First). In this case, a trader can look for the short sale first.

Sell DayOnce a long position is established, your goal is to exit on any follow-through the next day. The previous day's action indicates the most probable opening move. If the Buy Day finished with a strong close up continued strength the next morning.In a strong up trend, an upside penetration of the previous day's high can be expected. Do not stay in a position that is acting opposite to what you anticipated.

Sell Short DayAfter the market has rallied for two to three days, the short term up cycle should be close to exhausting itself. A "Sell Short Day" will normally follow a Sell Day. The same characteristics of a Buy Day will be found on the Sell Short Day only in reverse. The ideal Sell Short Day will open up from the previous day's close, make its high first and its low last, and close in the lower end of its range. A weak close on a Sell Short Day indicates further weakness and an opportunity to cover short positions the next day.

Sell Short Day (Cont)If price rallies sharply above the previous day's high before finding resistance, the objective for the short trade becomes a reaction back towards the previous day's high. In this case, the trade should be exited on the same day.If you are expecting a Sell Short Day but the market opens way down and finds support, the possibility exists that a rally may ensue, and the high would be made last, indicating further strength. Wait and push the Sell Short Day ahead to the next day. Then look to short a test of the previous day's high using the same rules.

Sell Short Day (Cont)If the market has just given a big decline, the shorts will be in no hurry to cover. Often, after a bit of time, the market can recover with activity.A Sell Short Day that has a fast decline and then rallies back forming a "V Expect a higher opening and a higher low on the reaction for the Buy Day.

Price PatternsThe 2-Day Rate of Change (ROC) is a useful tool which dovetails well with Taylor's in one day out the next technique. The 2-period ROC indicates whether the odds favor being a buy or a seller for the next day. Hold the trade overnight and exit according to his guidelines.

Price PatternsThree bar Triangle breakout pattern: Price has a lower high then the 2 day high and a higher low then the two day low with a narrowing of the ranges.Pinball: A 3-period RSI of the 1-day ROC has a reading of above 67 or below 33. Look for buys when price is above the 20-period EMA and for sells when price is below the 20-period EMA.Pinball2: Price has pulled completely away from a 5-period simple moving average indicating momentum. The first close in the opposite direction on the other side of a 4 SMA sets up a pinball sell.5 SMA: Price closes above a 5 SMA for 7+ bars. The first close on the opposite side sets up a Buying opportunity.

Basic FlipsThere is a small positive expectation across all markets when entering "long market on close" on the day the 2-period ROC first flips up and exiting on the next day's close. The ROC indicator turns up or down every 2 1/2 days on average. The 2-period ROC has better statistical expectation than either a simple price change (1-period ROC) or a longer term oscillator such as a moving average oscillator.

Short Term AntiAn "Anti" trade occurs when the slopes of two oscillators which have different time frames, are in opposition to each other. Wait for the 2-period ROC to correct two days in the opposite direction of the slope of an intermediate oscillator - I use the 16 period SMA of the 3/10 oscillator.The best trades occur when the slope of the longer-term indicator has just turned. The choicest trades appear as a small shoulder or a 1-2 day drift pattern.

ROC DivergenceIt is a reversal pattern. Don't look for this in the strongest trending markets. The ideal time window is 5-days but this pattern can form over 4 or 6 days.If the pattern does not work within 1-2 days, the primary trend is going to reassert itself!

Volatility Breakout SystemsA % of the previous day's range or a % of the previous N-bar range is added or subtracted to the closing price or the next day's opening price. This level is used as a buy or sell stop to enter in the direction the market is moving.Exit on next day's open/close or an ATR function. Risk n% ATR.

Using TICKS with Market Timing and Taylor Trend for the Day! Think of Ticks as correlating with the strength of buy or sell programs. Ticks can be used as a momentum indicator or an "overbought/oversold" indicator in a trading range environment. Ticks represent how much buying or selling power has been used to push the market up or down on a particular swing. Ticks must be watched with respect to overall market tone or type of environment (trading range or trending). Ticks can be used in a countertrend manner by looking to fade the extreme readings when in a trading range. Ticks have an upward bias and are highly correlated with market breadth. Ticks function as a confirmation/non-confirmation indicator. If the market makes a new high, the ticks should also make a new high. The market alternates between a trending and a consolidation mode. The day following a trend day or wide range day tends to be a particularly good one for using the ticks in a countertrend mode.

Using TICKS with Market Timing and Taylor Trend for the Day!Trend Day: Ticks reaching extreme readings on a single day indicate a trend day. There are good odds of follow-through the next morning after a day where the ticks hit +/- 1000 in the afternoon. Buy on Pullbacks: If Ticks make new highs above +1000 after 10 AM, look to buy the first pullback. If they make new HIGHS after 2 PM, buy the first pullback. An extreme tick reading in the first 30 minutes should be questioned.Extreme Tick Readings: Extreme tick readings between 10 - 12 EST indicate that the market may resume the trend in the afternoon, usually after a mid-day consolidation. If ticks do not make new highs (or lows when in a downtrend), then the afternoon leg will not have any follow-through. Extremes Tick readings in the afternoon favor a market follow-through into the next day.If price rises and falls as the tick rises and falls, the day should be a normal trading day. If the market has had a strong trend the day before, the odds of having morning follow through are very high.

Here are Taylor's main concepts in a nutshell.Trade within a 2-3 day time frame.Watch the price action around the previous day's high or low.Monitor the length of the last upswing relative to the last downswing (this shows up nicely on 60 and 120 minute charts)Determine what the "play" is for the day - the trend for the day or the "test" for the day.Ignore all news and fundamentals - concentrating strictly on what the tape or price action is telling you. In other words, follow the trend of the prices as they appear on the tape. Note where the important stopping points are (support and resistance).Though trading on a 1 to 2-day basis, be conscious of the bigger picture , the longer term price structure. Don't take countertrend trades within the first three days of a breakout from a chart formation.THE MECHANICS OF MANIPULATIONThe "fundamentals" of manipulation or speculation are not necessarily to be taken literally. Like Wyckoff's "composite operator", it serves as an analogy. It provides a model as to why there will be price swings in both directions, or small reactions along the way of a trend. The market is made of many different players on assorted time frames. Commercials, hedgers, and speculators taking profits or establishing positions will often provide the basis for a price reaction in the opposite direction relative to the current trend. The speculation component is small but will often move the price more violently up or down than the commercial activity. (a la "fund flushes" or "short covering rally".)THE CLASSIC CYCLE"The market has a definite 1-2-3 rhythm, with at times an extra 1-2 beats. The market goes up 1-2-3 days and reacts, the 4th and 5th figure is the variation when it runs that extra day or 2 in a trend. Start with three days as our trading cycle. We use the first day for buying and the 2nd and 3rd day for selling.Each day, the main focus is on the "Objective levels" - the previous day's high and low. The Book Method trader places his orders "at the market". Don't limit your orders. Don't worry about getting the extreme of the play. Trading ranges have the most mechanical accumulation and distribution rhythm. The highs and lows are often tested by a fraction of a point. When the market breaks out from these ranges and gets swing a bit deeper, the objective points will be exceeded by greater amounts and these are the real profit making opportunities.If the ranges are too narrow, and the spread between entry and objective point is too small, stand aside. The real trend of the market is the trend between the objective points. Don't get caught up in the intraday noise. The main money is made on capturing the trend for the day. There are often the first reversal day (a fresh buying day or sell short day) or the first day out of a narrow range day. The real money is staying with a good move off the opening price and holding overnight, playing for that overnight follow-through.The Book trader (Taylor called his technique the "Book Method") takes losses because he is playing for a more profitable opportunity. He is playing for position (meaning a trade that he can hold overnight). The Book trader knows that even though he has an advantage - there is no fool proof method. Trading is a game of averages. Wins bigger than losses and percentages. If you assume that the method is 50-50 win/loss, as long as the wins are greater than the losses, it is a good system.THE CLASSIC CYCLE"The market has a definite 1-2-3 rhythm, with at times an extra 1-2 beats. The market goes up 1-2-3 days and reacts, the 4th and 5th figure is the variation when it runs that extra day or 2 in a trend. Start with three days as our trading cycle. We use the first day for buying and the 2nd and 3rd day for selling.Each day, the main focus is on the "Objective levels" - the previous day's high and low. The Book Method trader places his orders "at the market". Don't limit your orders. Don't worry about getting the extreme of the play. Trading ranges have the most mechanical accumulation and distribution rhythm. The highs and lows are often tested by a fraction of a point. When the market breaks out from these ranges and gets swing a bit deeper, the objective points will be exceeded by greater amounts and these are the real profit making opportunities.If the ranges are too narrow, and the spread between entry and objective point is too small, stand aside. The real trend of the market is the trend between the objective points. Don't get caught up in the intraday noise. The main money is made on capturing the trend for the day. There are often the first reversal day (a fresh buying day or sell short day) or the first day out of a narrow range day. The real money is staying with a good move off the opening price and holding overnight, playing for that overnight follow-through.The Book trader (Taylor called his technique the "Book Method") takes losses because he is playing for a more profitable opportunity. He is playing for position (meaning a trade that he can hold overnight). The Book trader knows that even though he has an advantage - there is no fool proof method. Trading is a game of averages. Wins bigger than losses and percentages. If you assume that the method is 50-50 win/loss, as long as the wins are greater than the losses, it is a good system.Each day, the main focus is on the "Objective levels" - the previous day's high and low. The Book Method trader places his orders "at the market". If the ranges are too narrow, and the spread between entry and objective point is too small, stand aside. The real trend of the market is the trend between the objective points. Don't get caught up in the intraday noise. The main money is made on capturing the trend for the day. There are often the first reversal day (a fresh buying day or sell short day) or the first day out of a narrow range day. The real money is staying with a good move off the opening price and holding overnight, playing for that overnight follow-through.The Book trader ( Taylor called his technique the "Book Method") takes losses because he is playing for a more profitable opportunity. He is playing for position (meaning a trade that he can hold overnight). The Book trader knows that even though he has an advantage - there is no fool proof method. Trading is a game of averages. Wins bigger than losses and percentages. If you assume that the method is 50-50 win/loss, as long as the wins are greater than the losses, it is a good system.Don't limit your orders. Don't worry about getting the extreme of the play. Trading ranges have the most mechanical accumulation and distribution rhythm. The highs and lows are often tested by a fraction of a point. When the market breaks out from these ranges and gets swing a bit deeper, the objective points will be exceeded by greater amounts and these are the real profit making opportunities.

RULES FOR A BUY DAYBegin anticipating a Buy Day after one to two consecutive down closes. (Later, we will look at more ways of identifying a Buy Day using the 2-period rate-of-change). In an up-trending market, a buy day might occur after only 1 down close. A Buy Day can also occur after just one, wide-ranging down day such as an outside down day in a congestion area.Watch for the market to open and test the previous day's low for support. The opening move of the Buy Day can be anticipated by the previous day's action.For example, if the previous day's close was at the lower end of the range, then expect further weakness on the open of the Buy Day, and a likely penetration of the previous day's low. If the previous day's close was up, well off its low, then expect the Buy Day to open stronger. In this case, you must wait for a small morning pullback or reaction on which to enter.The ideal Buy Day includes:A test of the previous day's low that finds support.Lows made in the morning and high made in the afternoon.A close in the upper end of the daily range. (An up close form the previous close is preferable, but not mandatory).Look to go long on a test of the previous day's low. Very often this will occur in the first hour. (The best tests do tend to occur in the morning.) Once a long is entered, the low for the day should be considered a support level. A stop should be placed beneath this area.If it appears that the trade is going to close with a profit, it should be held overnight. The position is then exited on the next day on any follow through momentum.If price pushes too much below the previous day's low on a Buy Day morning before finding temporary support (this will occur in a downtrend), the objective for the long trade is the previous day's low. In this case, a long trade is exited on the same day instead of holding the trade overnight.If the market appears to be closing "flat" or unchanged, it indicates further weakness and longs should be exited before the close.Though the intent is to hold your position overnight, Taylor also recommended exiting positions on the same day if the market had an extremely favorable move, handing you a windfall profit. After this type of climactic day, the odds are 50 50 as whether the market will open up or down. The idea is to take a "lump sum" anytime the market gives it to you quickly, since prices can also snap back after a sharp run-up.If a Buy Day is expected but there is a large opening gap down below the previous day's low, (Buy Day Low Violation) buy at the first signs of support and look to exit on a reaction back up towards yesterday's low. The market may continue on up higher, but the trader must be aware that the market has already reached Taylor's objective level.If a Buy Day is expected, but the market gaps up by a large amount, there is risk that the high can be made first and the market will trade down from the opening price for the rest of the session (Buy Day Highs Made First). In this case, a trader can look for the short sale first. If the market then finds support on the first reaction down, a long trade can be initiated.RULES FOR A BUY DAYBegin anticipating a Buy Day after one to two consecutive down closes. (Later, we will look at more ways of identifying a Buy Day using the 2-period rate-of-change). In an up-trending market, a buy day might occur after only 1 down close. A Buy Day can also occur after just one, wide-ranging down day such as an outside down day in a congestion area.Watch for the market to open and test the previous day's low for support. The opening move of the Buy Day can be anticipated by the previous day's action.For example, if the previous day's close was at the lower end of the range, then expect further weakness on the open of the Buy Day, and a likely penetration of the previous day's low. If the previous day's close was up, well off its low, then expect the Buy Day to open stronger. In this case, you must wait for a small morning pullback or reaction on which to enter.The ideal Buy Day includes:A test of the previous day's low that finds support.Lows made in the morning and high made in the afternoon.A close in the upper end of the daily range. (An up close form the previous close is preferable, but not mandatory).Look to go long on a test of the previous day's low. Very often this will occur in the first hour. (The best tests do tend to occur in the morning.) Once a long is entered, the low for the day should be considered a support level. A stop should be placed beneath this area.If it appears that the trade is going to close with a profit, it should be held overnight. The position is then exited on the next day on any follow through momentum.If price pushes too much below the previous day's low on a Buy Day morning before finding temporary support (this will occur in a downtrend), the objective for the long trade is the previous day's low. In this case, a long trade is exited on the same day instead of holding the trade overnight.If the market appears to be closing "flat" or unchanged, it indicates further weakness and longs should be exited before the close.Though the intent is to hold your position overnight, Taylor also recommended exiting positions on the same day if the market had an extremely favorable move, handing you a windfall profit. After this type of climactic day, the odds are 50 50 as whether the market will open up or down. The idea is to take a "lump sum" anytime the market gives it to you quickly, since prices can also snap back after a sharp run-up.If a Buy Day is expected but there is a large opening gap down below the previous day's low, (Buy Day Low Violation) buy at the first signs of support and look to exit on a reaction back up towards yesterday's low. The market may continue on up higher, but the trader must be aware that the market has already reached Taylor's objective level.If a Buy Day is expected, but the market gaps up by a large amount, there is risk that the high can be made first and the market will trade down from the opening price for the rest of the session (Buy Day Highs Made First). In this case, a trader can look for the short sale first. If the market then finds support on the first reaction down, a long trade can be initiated.RULES FOR A BUY DAYBegin anticipating a Buy Day after one to two consecutive down closes. (Later, we will look at more ways of identifying a Buy Day using the 2-period rate-of-change). In an up-trending market, a buy day might occur after only 1 down close. A Buy Day can also occur after just one, wide-ranging down day such as an outside down day in a congestion area.Watch for the market to open and test the previous day's low for support. The opening move of the Buy Day can be anticipated by the previous day's action.For example, if the previous day's close was at the lower end of the range, then expect further weakness on the open of the Buy Day, and a likely penetration of the previous day's low. If the previous day's close was up, well off its low, then expect the Buy Day to open stronger. In this case, you must wait for a small morning pullback or reaction on which to enter.The ideal Buy Day includes:A test of the previous day's low that finds support.Lows made in the morning and high made in the afternoon.A close in the upper end of the daily range. (An up close form the previous close is preferable, but not mandatory).Look to go long on a test of the previous day's low. Very often this will occur in the first hour. (The best tests do tend to occur in the morning.) Once a long is entered, the low for the day should be considered a support level. A stop should be placed beneath this area.If it appears that the trade is going to close with a profit, it should be held overnight. The position is then exited on the next day on any follow through momentum.If price pushes too much below the previous day's low on a Buy Day morning before finding temporary support (this will occur in a downtrend), the objective for the long trade is the previous day's low. In this case, a long trade is exited on the same day instead of holding the trade overnight.If the market appears to be closing "flat" or unchanged, it indicates further weakness and longs should be exited before the close.Though the intent is to hold your position overnight, Taylor also recommended exiting positions on the same day if the market had an extremely favorable move, handing you a windfall profit. After this type of climactic day, the odds are 50 50 as whether the market will open up or down. The idea is to take a "lump sum" anytime the market gives it to you quickly, since prices can also snap back after a sharp run-up.If a Buy Day is expected but there is a large opening gap down below the previous day's low, (Buy Day Low Violation) buy at the first signs of support and look to exit on a reaction back up towards yesterday's low. The market may continue on up higher, but the trader must be aware that the market has already reached Taylor's objective level.If a Buy Day is expected, but the market gaps up by a large amount, there is risk that the high can be made first and the market will trade down from the opening price for the rest of the session (Buy Day Highs Made First). In this case, a trader can look for the short sale first. If the market then finds support on the first reaction down, a long trade can be initiated.SELL DAYOnce a long position is established, your goal is to exit on any follow-through the next day. Again, the previous day's action will give an indication of today's most probable opening move. If the Buy Day finished with a strong close up, this indicates continued strength the next morning.In a strong up trend, an upside penetration of the previous day's high can be expected. Think about selling into strength when there are ready buyers to take the position off your hands as opposed to waiting for the price action to reverse and then having buyers back away from you.Do not stay in a position that is acting opposite to what you anticipated. For example, an up close in the upper end of the range on a Buy Day indicates continued strength the following day. However, if price gaps lower and does not rally immediately, exit longs at the market and take a small loss.SELL SHORT DAYAfter the market has rallied for two to three days, the short term up cycle should be close to exhausting itself. A "Sell Short Day" will normally follow a Sell Day. Again, the next day in the cycle is determined by the previous day's action, the strength of the previous day's close, and the strength of the longer-term trend.The same characteristics of a Buy Day will be found on the Sell Short Day only in reverse. Watch for a test of the previous day's high or a lower high, indicating resistance. The ideal Sell Short Day will open up from the previous day's close, make its high first and its low last, and close in the lower end of its range. A weak close on a Sell Short Day indicates further weakness and an opportunity to cover short positions the next day.If price rallies sharply above the previous day's high before finding resistance (which will occur in an up trend), the objective for the short trade becomes a reaction back towards the previous day's high. In this case, the trade should be exited on the same day.Let's say we're looking for a Sell Short Day but the market opens way down and finds support. The possibility exists that a rally may ensue, and the high would be made last, indicating further strength. We do not want to short a market that closes in the upper end of its daily range. Wait and push the Sell Short Day ahead to the next day. Then look to short a test of the previous day's high using the same rules.If the market has just given a big decline, the shorts will be in no hurry to cover. But often after a bit of time, the market can recover with activity.A Sell Short Day that has a fast decline and then rallies back forming a "V". Expect a higher opening and a higher low on the reaction for the Buy Day.SELL SHORT DAYAfter the market has rallied for two to three days, the short term up cycle should be close to exhausting itself. A "Sell Short Day" will normally follow a Sell Day. Again, the next day in the cycle is determined by the previous day's action, the strength of the previous day's close, and the strength of the longer-term trend.The same characteristics of a Buy Day will be found on the Sell Short Day only in reverse. Watch for a test of the previous day's high or a lower high, indicating resistance. The ideal Sell Short Day will open up from the previous day's close, make its high first and its low last, and close in the lower end of its range. A weak close on a Sell Short Day indicates further weakness and an opportunity to cover short positions the next day.If price rallies sharply above the previous day's high before finding resistance (which will occur in an up trend), the objective for the short trade becomes a reaction back towards the previous day's high. In this case, the trade should be exited on the same day.Let's say we're looking for a Sell Short Day but the market opens way down and finds support. The possibility exists that a rally may ensue, and the high would be made last, indicating further strength. We do not want to short a market that closes in the upper end of its daily range. Wait and push the Sell Short Day ahead to the next day. Then look to short a test of the previous day's high using the same rules.If the market has just given a big decline, the shorts will be in no hurry to cover. But often after a bit of time, the market can recover with activity.A Sell Short Day that has a fast decline and then rallies back forming a "V". Expect a higher opening and a higher low on the reaction for the Buy Day.SELL SHORT DAYAfter the market has rallied for two to three days, the short term up cycle should be close to exhausting itself. A "Sell Short Day" will normally follow a Sell Day. Again, the next day in the cycle is determined by the previous day's action, the strength of the previous day's close, and the strength of the longer-term trend.The same characteristics of a Buy Day will be found on the Sell Short Day only in reverse. Watch for a test of the previous day's high or a lower high, indicating resistance. The ideal Sell Short Day will open up from the previous day's close, make its high first and its low last, and close in the lower end of its range. A weak close on a Sell Short Day indicates further weakness and an opportunity to cover short positions the next day.If price rallies sharply above the previous day's high before finding resistance (which will occur in an up trend), the objective for the short trade becomes a reaction back towards the previous day's high. In this case, the trade should be exited on the same day.Let's say we're looking for a Sell Short Day but the market opens way down and finds support. The possibility exists that a rally may ensue, and the high would be made last, indicating further strength. We do not want to short a market that closes in the upper end of its daily range. Wait and push the Sell Short Day ahead to the next day. Then look to short a test of the previous day's high using the same rules.If the market has just given a big decline, the shorts will be in no hurry to cover. But often after a bit of time, the market can recover with activity.A Sell Short Day that has a fast decline and then rallies back forming a "V". Expect a higher opening and a higher low on the reaction for the Buy Day.PRICE PATTERNSThe 2-Day Rate of Change is a useful tool which dovetails well with Taylor's in one day out the next technique. The 2-period ROC indicates whether the odds favor being a buy or a seller for the next day. Hold the trade overnight and exit according to his guidelines. (Exit: at or around the previous day's high when long. In trending or volatile markets, you can usually exit on a deeper penetration of this high. If the market opens down, exit on the first reaction.)PRICE PATTERNSThree bar Triangle breakout pattern: Price has a lower high then the 2 day high and a higher low then the two day low with a narrowing of the ranges.Pinball: A 3-period RSI of the 1-day ROC has a reading of above 67 or below 33. Look for buys when price is above the 20-period EMA and for sells when price is below the 20-period EMA.Pinball2: Price has pulled completely away from a 5-period simple moving average indicating momentum. The first close in the opposite direction on the other side of a 4 SMA sets up a pinball sell.5 SMA: Price closes above a 5 SMA for 7+ bars. The first close on the opposite side sets up a Buying opportunity.Basic FlipsThere is a small positive expectation across all markets when entering "long market on close" on the day the 2-period ROC first flips up and exiting on the next day's close. This indicator turns up or down every 2 1/2 days on average. The 2-period ROC has better statistical expectation than either a simple price change (1-period ROC) or a longer term oscillator such as a moving average oscillator.Short Term AntiAn "Anti" trade occurs when the slopes of two oscillators which have different time frames, are in opposition to each other. Wait for the 2-period ROC to correct two days in the opposite direction of the slope of an intermediate oscillator - I use the 16 period SMA of the 3/10 oscillator.The best trades occur when the slope of the longer-term indicator has just turned. The choicest trades have a certain "look" to them. They appear as a small shoulder or a 1-2 day drift pattern.ROC DivergenceThe ideal time window is 5-days but sometimes this pattern can form over 4 or 6 days. It is a reversal pattern. Don't look for this in the strongest trending markets. If the pattern does not work within 1-2 days, the primary trend is going to reassert itself!VOLATILITY BREAKOUT SYSTEMS: A % of the previous day's range or a % of the previous N-bar range is added or subtracted to the closing price or the next day's opening price. This level is used as a buy or sell stop to enter in the direction the market is moving. Exit on the next day's open/close or an ATR function. Risk n% ATR.A FEW NOTES ON USING THE TICKS WITH MARKET TIMING AND TAYLOR TREND FOR THE DAY!Ticks can be used as a momentum indicator or an "overbought/oversold" indicator in a trading range environment. Think of Ticks as correlating with the strength of buy or sell programs. For example, if there is a large positive reading, the majority of stocks are being bought. Ticks also represent how much buying or selling power has been used to push the market up or down on a particular swing. For example, if the Ticks are +1000, and the SPs have rallied 7 points, there may not be much upside left since the majority of shares are already on an "up-tick". The market needs to have a small pause to catch its breath before making another run.Ticks must be watched with respect to overall market tone or type of environment (trading range or trending). Ticks can be used in a countertrend manner by looking to fade the extreme readings when in a trading range. This is appropriate for a low volume environment. In a heavy volume trending environment, they can be used to enter on retracements in the direction of the trend. For example, if the market is in a steady up trend and there has been a burst of buying activity that drives the plus ticks to +1200, watch for the ticks to retrace back towards zero as a buying opportunity.Ticks have a slight upward bias, and they are also highly correlated with market breadth. For example, if the breadth shows net 1400 advancing issues over declining issues, the range in the ticks will be skewed to the positive side for most of the day.Ticks also function as a confirmation/non-confirmation indicator. If the market makes a new high, the ticks should also make a new high. When this occurs, retracements can be bought and sold in the direction of the trend. However, if the price makes a new high and the ticks do not, a price reversal is more likely. Always remember, in a strongly trending environment, ticks and momentum based indicators, including price oscillators, will have a tendency to give premature readings, so be sure and assess the degree of trend in the market before using these types of indicators. Watch for the buy or sell divergences in the Ticks when observing the price action around a previous day's high or low.Since the market alternates between a trending and a consolidation mode, the day following a trend day or wide range day tends to be a particularly good one for using the ticks in a countertrend mode.If Ticks reach an extreme reading on a single day, it indicates a trend day. There are good odds of follow-through the next morning after a day where the ticks hit +/- 1000 in the afternoon. The following day should see a reading in the ticks that is less extreme before the trend turns. This creates a divergence between the price and the Ticks.If the Ticks make new highs above +1000 after 10 AM, look to buy the first pullback. If they make new HIGHS after 2 PM, buy the first pullback. An extreme tick reading in the first 30 minutes should be questioned. For example, there will often be an extreme tick reading around 10 AM if there is a morning economic number that has been released at this time. This is the once time that the market can reverse for the day off an extreme tick reading.If there are extreme tick readings between 10 - 12 EST, look for the market to resume the trend in the afternoon, usually after a mid-day consolidation. If ticks do not make new highs (or lows when in a downtrend), then the afternoon leg will not have any follow-through. If there are new extremes in the ticks in the afternoon, look for the market to have follow-through into the next day.If the SP moves up and down as the tick rises and falls, it indicates that the day should be a normal trading day. If the market has had a strong trend the day before, the odds of having morning follow through are very high. The exception to this would be if the SP closes more than 6 points below the high of the day or 6 points above the low. If there have been two trend days in a row, the odds would favor a consolidation or "Z" day as opposed to another trend day.A FEW NOTES ON USING THE TICKS WITH MARKET TIMING AND TAYLOR TREND FOR THE DAY!Ticks can be used as a momentum indicator or an "overbought/oversold" indicator in a trading range environment. Think of Ticks as correlating with the strength of buy or sell programs. For example, if there is a large positive reading, the majority of stocks are being bought. Ticks also represent how much buying or selling power has been used to push the market up or down on a particular swing. For example, if the Ticks are +1000, and the SPs have rallied 7 points, there may not be much upside left since the majority of shares are already on an "up-tick". The market needs to have a small pause to catch its breath before making another run.Ticks must be watched with respect to overall market tone or type of environment (trading range or trending). Ticks can be used in a countertrend manner by looking to fade the extreme readings when in a trading range. This is appropriate for a low volume environment. In a heavy volume trending environment, they can be used to enter on retracements in the direction of the trend. For example, if the market is in a steady up trend and there has been a burst of buying activity that drives the plus ticks to +1200, watch for the ticks to retrace back towards zero as a buying opportunity.Ticks have a slight upward bias, and they are also highly correlated with market breadth. For example, if the breadth shows net 1400 advancing issues over declining issues, the range in the ticks will be skewed to the positive side for most of the day.Ticks also function as a confirmation/non-confirmation indicator. If the market makes a new high, the ticks should also make a new high. When this occurs, retracements can be bought and sold in the direction of the trend. However, if the price makes a new high and the ticks do not, a price reversal is more likely. Always remember, in a strongly trending environment, ticks and momentum based indicators, including price oscillators, will have a tendency to give premature readings, so be sure and assess the degree of trend in the market before using these types of indicators. Watch for the buy or sell divergences in the Ticks when observing the price action around a previous day's high or low.Since the market alternates between a trending and a consolidation mode, the day following a trend day or wide range day tends to be a particularly good one for using the ticks in a countertrend mode.If Ticks reach an extreme reading on a single day, it indicates a trend day. There are good odds of follow-through the next morning after a day where the ticks hit +/- 1000 in the afternoon. The following day should see a reading in the ticks that is less extreme before the trend turns. This creates a divergence between the price and the Ticks.If the Ticks make new highs above +1000 after 10 AM, look to buy the first pullback. If they make new HIGHS after 2 PM, buy the first pullback. An extreme tick reading in the first 30 minutes should be questioned. For example, there will often be an extreme tick reading around 10 AM if there is a morning economic number that has been released at this time. This is the once time that the market can reverse for the day off an extreme tick reading.If there are extreme tick readings between 10 - 12 EST, look for the market to resume the trend in the afternoon, usually after a mid-day consolidation. If ticks do not make new highs (or lows when in a downtrend), then the afternoon leg will not have any follow-through. If there are new extremes in the ticks in the afternoon, look for the market to have follow-through into the next day.If the SP moves up and down as the tick rises and falls, it indicates that the day should be a normal trading day. If the market has had a strong trend the day before, the odds of having morning follow through are very high. The exception to this would be if the SP closes more than 6 points below the high of the day or 6 points above the low. If there have been two trend days in a row, the odds would favor a consolidation or "Z" day as opposed to another trend day.