Article Swing Trading: Rules and Philosophy

[T2W Bot]

My personal trading style is based on a method described in the 1950?s by a veteran floor trader named George Douglass Taylor.  The ?Taylor Trading Technique? is a short-term method for trading daily price movements that relies entirely on odds and percentages. It is a method as opposed to a system. Very few people can blindly follow a system, though many find it easier to be discretionary in a systematic way.
Because this short-term swing technique generates frequent trades, it is important to know the correct plays, when to lock in profits, and when to seek the true trend. Taking a loss is merely playing for better position. One trades strictly for probable future results, not for what the market might do.
To know the correct play is to know whether to buy or sell first, to exit or hold. Trades are based on objective points, which are simply the previous day’s highs and lows. Movement between these two points determines the true trend.
When swing trading, adjust your...

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[Rhody Trader]

In this article Linda Bradford Raschke outlines the "Taylor Trading Technique", the basis of her own trading methods.

 

[bakula]

very down to earth advice. thanks!

 

[DeltaGuy]

She always has excellent advice - all her articles do.

 

[daybyday]

'scratch or exit a trade - It's always OK to scratch a trade!'
Basic rules for traders, seventh bullet down.
Scratch a trade ??? Someone please explain, thanks.

 

[frugi]

Exit at breakeven.

 

[millsy500]

I like the strategy of exiting a trade on the day of opening if its not going in my favour,as ive been having trouble letting losing trades run, thinking its going to come back. Which i've now fixed!

Millsy

 

[hennie]

that is the basic rules for traders , thanks

 

[HEC]

Someone to help me

I have some questions about this article, how can I ask these questions?

 

[Rhody Trader]

I have some questions about this article, how can I ask these questions?

Ask them here. If any of the members can answer, I'm sure they will.

 

[Tomerep]

I hope its not an article that should promote her web site. but good article indeed.

 

[jessechan]

A solid advice from practitioner.

 

[efficiency]

Meaning no disrespect to LBR, she somewhat *******ized Taylor's work to some degree. George Douglass (that's right 2 S's) Taylor was primarily a floor GRAIN trader. No computers or charts involved. Just staying IN the moment with paper, pencil, and arithmetic.

The only stock mentioned in his one and only book was US Steel (USX) which he apparently traded over and over since their were specific examples dating back to 1933 (the book was written in 1950).

The crux of his method is measuring the swings. The high from day 1 to the low of day 2 he designated DCL. The low from day 1 to the high day 2 as RLY. Grapically, this makes an "X"

Futhermore, any Day 2 high that exceeded day 1's high was quantitfied and labeled BH. Any day 2 low that was below day 1's low was designated BU

Additionally the trader observes whether the high or low was made FIRST each day.

In the context of being long only, the intent is to buy near the low of Day 1 and sell near the high of day 2. Day 3, was considered the short day. A buy day is LMF, a short day is HMF, and the sell day can be EITHER (what LBR refers to as a zig zag day)

Putting these actions in a matrix:

BH HMF..............................................Short

BH LMF..............................................Hold ALL day

BU HMF...............................................AVOID

BU LMF............................................... BUY

Obviously "they" don't ring a bell telling you if today is LMF or HMF, that's where trading intution, and skill play their role.

With respect to measuring swings, simply put, you cannot have a large RLY day without a small DCL.. A small DCL implies a prior day close somewhat NEAR the prior day high.

The preceding is valid but Taylor's concept of a 3 day cycle Buy/Sell/Sell Short may have been more reliable in 1950 than today (due to program trading, instantaneous info, and multiple market makers).

And, ............in the US, unless you have 475 tax status, trading in the same stock over and over (occasionally taking a loss albeit small loss) would run into a wash sale obstacle.

Taylor's book is highly recommended. It paid for itself immediately once understood, but is NOT an easy book to read.

 

[bullfrog]

Great article from LBR on the Taylor method which has much in common with Eugene Nofri's Congestion Phase System and some of the calculated points and envelope resemble basic Drummond Geometry it all shows a creative osmosis of knowledge ))) .

 

[prafull]

nice article.simple and effective.

 

[etherington]

I have bought the Taylor book. Does anyone know where data showing whether the high or low for each day occurred first can be found? Without this it seems impossible to back test.

 

[Luckylucille1]

I find this style of writing so uplifting "Reserve compassion for yourself and your limitations." And so full of useful info too! Thanks Linda

 

[as61852]

Far above excellent is this article. Many pointed and sharp
arrows are given for the trader's use and defense against
uncertainty in making a very accurate and profitable strategy
for success.

 

[Gideon300]

The few times I've been fortunate enough to hear Ms. LBR or read her writings (New Market Wizards interview was great), I've been stunned. Refreshingly open, honest, helpful, direct, clear.... I could go on. Thank you for the great article!