Last Thursday I did a web seminar on swing trading using the methods I use and teach for my Swing Trader’s Insight advisory. The core methodology I use is based on the work of George Douglas Taylor, what I call the Taylor Technique.
You can read a basic primer on the Taylor Technique here, but in a nutshell, TT looks to enter markets at trend changes. TT says trend changes are confirmed when the market trades back above the previous session for a long entry, or the previous session high for a short entry.
An attendee noticed that in two of the examples I used, the time of entry was very early in the morning (early AM Chicago time, anyway). He wanted to know how I would handle something like that – if an entry had come and gone by the time I was up and monitoring the markets.
There are a couple of ways to handle this. First, you can look for a second entry opportunity, if the market comes back to the initial entry price. Such a ‘second pass’ entry might occur in conjunction with a report being released or profit taking off the initial move. If I missed the initial entry, I will generally take a ‘second pass’ entry, provided it happens relatively early in the session.
If it looks like a ‘second pass’ is going to occur last in the session (market selling off toward the previous session low late in the day), I won’t take the trade. The relationship of the open to the close of the session is important in TT. If a market is closing weak (close lower than open), we anticipate follow through selling in the next session. This means the odds favor that we will be able to buy at a better (lower) price on the following day. The same thing goes for short sales on days that are closing on strength.
If you really like a market’s setup, but missed the ‘ideal’ TT entry, you can monitor intraday action for another entry (higher for a buy, lower for a short sale). It’s beyond the scope of this article, but in general I look for things like intraday pullbacks, breakouts, etc. If you choose to enter at a less advantageous price, the same rules about carrying the trade overnight apply – if a trade is against you at the end of the session, you should generally liquidate the trade, playing for a better entry in the next session.
He other choice for missed signals is to not take them. TT generally has you wait for one ‘ideal’ entry per market, per day. If that entry is missed, you wait for the next setup. That is part of the reason I analyze 23 markets for Swing Trader’s Insight. On any given day, there will generally be a few with what I see as good TT setups. I concentrate on those markets, and leave the rest for another day.
By narrowing my focus down to a smaller number of markets, I get the best of both worlds. I have a better chance of having a market both set up for entry and the timing to be able to enter the trade within my trading schedule. In this way, it’s easier to avoid taking more marginal setups, the sort of thing that is more likely to occur when you follow just one market.
Analyzing a larger number of markets, then screening them down to a smaller subset of markets with tradable setups both provides you with more flexibility, while actually helping you keep your trading discipline. By approaching analysis in a systematic method, then getting it down on paper (like I do for STI) for the next day, you improve your odds of trading success.
This is a sample of the analysis from my Swing Trader’s Insight advisory service. For information on STI, and to sign up for a free two week trial, visit here.
The information contained here includes information from sources believed to be reliable and accurate, but no guarantee is made as to accuracy, nor do they purport to be complete. Opinions are subject to change without notice. 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.
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