The Taylor Trading Technique | Scott Hoffman

In my opinion, George Douglass Taylor was one of the greatest trading thinkers, and luckily he left behind one book on trading: 'The Taylor Trading Technique' (1950). This book lays out his 'Taylor Book Method' for swing trading in futures. Taylor postulated that the markets had patterns based on "market engineering" from the "powers that be" in the grain markets. These insiders would frequently cause prices to decline to set up a buying opportunity for themselves. Then, after the market rallied sufficiently to yield profit for these insiders, a short-term top was created to give them a selling opportunity. The market would sell off, and the cycle would start again. 

 

George Douglass Taylor was a grain trader in the 1940s and 1950s at the CBOT pit
and is credited original author of the 3 Day Cycle Short-Term Trading System.

The effect of this engineering was to amplify the natural rhythm of the market, creating false moves that would fool traders into buying when they should be selling, and vice versa. The thrust of the Taylor Technique is to identify this rhythm and take advantage of the "false moves". I have long maintained that if an individual could identify moves in the market that would serve to inflict the most pain on unwary traders then they would have a great trading system. I believe the Taylor Technique does that. Taylor created this method for the grain futures markets, but I find it equally applicable in the financial futures markets today. 

 

George Douglass Taylor’s system of short-term swing trading is based on the premise that the market moves in two to three day timeframes, moving from a low to a high and back to a low. The other important concepts are the importance of the previous day’s high and low, the length of upswings relative to downswings, and being a solely technical trader (ignoring fundamentals).

Cycle Day #1 – Buy Day

The first day of the cycle is the buying day. Look for a Buy Day two days after a swing high (the highest high of the past few days). On a Buy Day, look for the market to make its lows first, finding support around yesterday’s low. If the market opens flat to higher, look to buy the first sell off towards the previous low. If the market trades under yesterday’s low, be careful about going home long. The market should close higher than where it opened. If it is making new lows late in the day, it is usually best to exit. You can often get in the next day at a better price.

 

Cycle Day #1 - Buy Day

Two-Day Rate Of Change = ROC(2) 

Generally, it’s good rule of thumb not to buy late in the day on a buy day if the market is heading lower or closing lower than where it opened. Odds favor a lower opening the next day, giving you a better enter price. Likewise, if the market is going to close lower than it opened, don’t be afraid to liquidate your position. Odds are in your favor that you’ll be able to buy at a lower price the next day.

Cycle Day #2 – Sell Day

If you are long and the market is closing in your favor, carry your long position overnight. Odds favor a higher opening the next day setting up the Sell Day, the second day of the cycle. On the Sell Day you should look to sell into strength, liquidating your position, and going home flat. Often, the sell day trades on both sides in what I call a 'fade' day. A fade day often follows a trend day and can be traded from either side.

 Cycle Day #2 - Sell Day

Cycle Day #3 – Sell Short Day

The third day of the cycle is the Sell Short Day. The Sell Short Day is the mirror image of the buying day. On a sell short day, you should be looking to sell early morning resistance, looking for resistance around the previous day’s high. The market should not be making highs late in the day, if it is you should be able to get a better entry point the next day. On a Sell Short Day, the market should close lower than it opened. The Sell Short Day is often followed by a 'Fade' day.

 

Cycle Day #3 - Sell Short Day.

That is the gist of Taylor’s technique - a rhythm of buy-sell-sell short. I don’t always recognize where we are in Taylor’s cycle (you’re always learning!), but on days when it is clear, at the least it gives you a good indication of the market’s bias for that day. In swing trading, the relation of the open to the close should indicate the direction of the next morning’s opening. This helps you determine whether the odds favor being a buyer or a seller on a given day.

Reference:

Scott Hoffman (2012) - Insights of a Swing Trader. (videos)

Scott Hoffman (2003) - Swing Traders Users Guide.

George Douglass Taylor (1950) - The Taylor Trading Technique.

 

See also:

Cameron Benson (2024) - The Complete 3 Day Cycle Short-Term Trading System.

Larry Williams (1998) - Swing Points as Trend Change Indication. 

Linda Bradford Raschke & Laurence A. Connors (1996) - Street Smarts: High Probability Short-Term Trading Strategies.

The Market Makers Method | Jones Zondo

Price is a reflection of the number of transactions and the price paid for these transactions. A large number of transactions are required in order to shift price. The Forex market is said to trade about $4,000,000,000,000 [four trillion dollars] on average daily. The bulk of transactions are executed by large “Warren Buffet” institutions, and not by laptop traders such as ourselves.

 » A typical pattern of behavior particularly when analyzing the Three-Day Cycle is to be able
to identify a peak high followed by three moves down and a reversal which will form a peak low. «

Market Maker ability to dominate the market is overwhelming. It costs roughly 10,000 Lots to move the market by 1 pip, with this in mind Market Makers have the ability to move the price at will and retail traders can’t. For a retail trader to truly succeed in Forex, you need to at least have a concept of this Mammoth process so that you will understand what is happening and why. Rather you adapt to trade with them instead of against them once we are done with the secrets. Once you realize that price is moved as a result of intention, logic decision and the idea that price is a product of emotional feeling (sentiments) of various traders is misguiding “BS”. Failure to realize this, your trade career will be emotion driven leaving you to react to every trade.

Quoted from:
Jones Zondo (2018) - Market Makers Secrets. Private study notes extracted from various entities. 

 

See also:

Steve Mauro (2011) - The Market Makers Method.

Cameron Benson (June 16, 2024) - The Complete 3 Day Cycle Short-Term Trading System.

Michael J. Huddleston (2016) - ICT Forex - Market Maker Primer Course. (videos)

ICT Intraday Templates & Setups for ES/NQ/YM | Michael J. Huddleston

There are six Intraday Templates and Trading Setups for the S&P (ES), the Nasdaq (NQ) and the Dow Jones (YM) - three bullish and three bearish ones:

• Two Session Up Close OR Two Session Down Close. (1.1 + 1.2)
• AM Rally and PM Reversal OR AM Decline and PM Reversal. (2.1 + 2.2)
• Consolidation AM Rally and PM Decline OR Consolidation AM Decline and PM Rally. (3.1 + 3.2)

1.1    Two Session Up Close (Trend Day ≈ 10% of all trading days)

If we are in the middle of an intermediate or long term price swing based on what we would see on the HTF (Higher timeframes = 4 hour, daily, weekly, monthly) chart, this is the classic scenario. When we start approaching HTF opposing arrays, this profile is less likely to occur. The daily range can go straight trough the lunch hour with very little consolidation whatsoever, depending on what the catalyst was that send prices higher it could be a very strong economic news release. Don't think we’ll always get the consolidation in lunch hour, if we move higher fast there is a chance they work trough lunch. PM session would be ideal if its symmetrical to the AM session.

• Institutional Order Flow (IOF): Bullish.
• AM Trend: Returns to a Discount Array then rallies.
• Lunch Hour: Consolidates with shallow retracements.
• PM Trend: Runs the Lunch Hour Lows [Sell Stops] OR Drops into a Fair Value (FV) Discount Array then rallies into Close.

 1.2    Two Session Down Close (Trend Day ≈ 10% of all trading days)

If we are in the middle of an intermediate or long term price swing based on what we would see on the HTF chart, this is the classic scenario. When we start approaching HTF opposing arrays, this profile is less likely to occur.

 

• Institutional Order Flow: Bearish.
• AM Trend: Returns to a Discount Array then declines.
• Lunch Hour: Consolidates with shallow retracements.
• PM Trend: Runs the Lunch Hour Highs [Buy Stops] OR Rises into a Fair Value Discount Array then declines into Close.
  

 

Tips for Two Session Up Close OR Two Session Down Close = trending days:
► When daily and 4H institutional order flow is bullish (two session up close)/bearish (two session down close).
► If we're in the middle of an intermediate term or long term price swing based on what we see on the HTF chart, then this is the classic scenario until we start approaching an opposing array on the 4h/daily/weekly. PM session would be ideal if its symmetrical to the AM session (measured move).
► The daily range can go straight through the lunch hour with very little consolidation whatsoever, depending on what the catalyst was that send prices higher it could be a very strong or surprised economic news release.
► Don't think we'll always get the consolidation in lunch hour, if we move higher fast there's a chance they work through lunch.
► ► How to trade: ICT always looks for SMT (Smart Money Tool / Smart Money Technique) between the 3 indices at the lows/highs on both sessions.
AM SMT: compare London lows/highs and 9:30 am lows/highs.
PM SMT: compare lunch lows/highs and the high/low formed from the 13:00 candle. One has to diverge.
AM session hold till about 10:30-11:00 and also look for 15m PD arrays.
PM session: besides the SMT we can also return to FVG or OB formed in lunch hour.

2.1    AM Rally PM Reversal (Typical Day ≈ 25% of all trading days)

Price is yet to fulfill a completion of a bullish run, but very close to where we are presently there is a higher time frame premium PD (Premium/Discount) array. The session will start off bullish until it hits the HTF PD array which causes the intraday market reversal.

 

• Institutional Order Flow: Bullish - under HTF Premium-Discount Array.
• AM Trend: Returns to a Discount Array then rallies.
• Lunch Hour: Consolidates with shallow retracements.
• PM Trend: Runs the Lunch Hour Highs [Buy Stops] and reverses into Close OR Runs the Intraday High and then reverses into Close.
• PM Trend can resume higher if AM session Discount = HTF.

 

2.2   AM Decline and PM Reversal (Typical Day ≈ 25% of all trading days)

 

• Institutional Order Flow: Bearish (IOF) - above HTF Discount Premium/Discount Array.
  AM Trend: Returns to a Premium Array then declines.
• Lunch Hour: Consolidates with shallow retracements.
• PM Trend: Runs the Lunch Hour Lows [Sell Stops] and then reverses into Close OR Runs the Intraday Lows and then reverses into Close..
• PM Trend can resume lower if AM session Premium = HTF. 

 

Tips for AM Rally PM reversal (bullish)/AM Decline PM reversal (bearish):
► When daily and 4H institutional order flow is bullish/bearish and price is near a 4H/daily TF PD array, so this model is the completion of a run. AM session is bullish/bearish until it hits the HTF pd array which causes the intraday market reversal.
► In the AM scenario you first drop into a 1H or 4H discount (bullish) / premium (bearish), then rally into HTF PD array (4H/daily/weekly).
Smart money reversal (SMR) - PM trend could either

- Run out the AM high/low and then rally or make a LH when it reverses. Just a run above a STH is also possible.
- Be just a retracement into the AM range and then continue HTF trend or really reverse on HTF. How do we know which one the PM trend will do? The PM session can resume higher/lower (reversal) if the AM session premium array equals a higher timeframe (4H, daily, weekly, monthly) premium array, it can go back into that array in PM and recapitalize that and then go lower and resume lower. If that’s NOT the case we can expect price to continue until we reach that HTF array.

► ► How to trade: ICT always looks for SMT between the 3 indices at the lows/highs on both sessions.

AM SMT: compare London lows/highs and 9:30 lows/highs. PM SMT: compare lunch lows/highs and the high/low formed from the 13:00 candle. One has to diverge. So in the bearish scenario: If the AM high around 10:30am EST but often closer to 11:00 is below a 15m or the PD array, then we're going to be anticipating, before it even happens, outside the London lunch around 1 pm an initial rally into the 15m PD array followed by a HTF reversal. So in the AM session we're going to be holding our trade until there.
PM SMT: try to hold until 15:00 at least. If price is in the premium of the AM dealing range, we could see price continue lower/higher (when the premium array is not a HTF premium array), otherwise price will reverse there.

 

3.1    Consolidation AM Rally PM Decline (Trading Range /Neutral Day ≈ 35% of all trading days)

If unsure of what the IOF of the current day is or where we are relative to Premium/Discount on Daily/4h, chances are we likely see this scenario - especially if there is no high/medium impact news expected during 10am or later in the day.

• Institutional Order Flow: Neutral.
  
• AM Trend: Returns to a Discount Array then rallies OR expands Higher from Equilibrium to run London session Buy Stops.
• Lunch Hour: Consolidates with shallow retracements.
• PM Trend: Runs the Lunch Hour Highs [Buy Stops] and then reaches for Day's Sell Stops OR Runs the Intraday High and then reaches for ID/London session Sell Stops. PM Trend can simply consolidate into Close after Lunch Hour.
  

3.2    Consolidation AM Decline PM Rally (Trading Range / Neutral Day ≈ 35% of all trading days)

If unsure of what the Institutional Order Flow of the current day is or where we are relative to Premium/Discount on Daily/4h, chances are we likely see this scenario - especially if there is no high/medium impact news expected during 10am or later in the day.

• Institutional Order Flow: Neutral.
• AM Trend: Returns to a Premium Array then declines OR expands Lower from Equilibrium to run London session Sell Stops.
• Lunch Hour: Consolidates with shallow retracements.
• PM Trend: Runs the Lunch Hour Lows [Sell Stops] and then reaches for Day's Buy Stops OR Runs the Intraday Low and then reaches for the Intraday London session Buy Stops.
• PM Trend can simply consolidate into Close after Lunch Hour. 

Tips for Consolidation AM Rally and PM Decline / Consolidation AM Decline and PM Rally:

► In this scenario Institutional Order Flow is neutral or unclear where we're at relative to premium or discount on 4H or daily. This scenario happens a lot in index trading which can be frustrating if you don’t know the mechanics behind it. When there's a strong directional bias behind the marketplace or the underlying meanings of the market suggest higher/lower prices, DO NOT look for this scenario. This is not seek and destroy (NFP), this is simply consolidation. This happens when there’s a lack of news or trend.

AM: price returns to a premium/discount then rallies OR after the first hour of the opening range or expands higher from EQ to run SSL/BSL (Buy Side Liquidity/Sell Side Liquidity)from London or intraday.
PM: 2 scenario’s —> 1. Run on lunch hour highs/lows then rally for AM session BSL/SSL or 2. run intraday high/lows and then run for intraday or London SSL/BSL.

► ► How to trade: Which one is it going to do, lunch highs/lows or AM SSL/BSL? We are going to be looking for a 15m PD array inside a 4h/Daily PD array. So the HTF confluence is the catalyst for the reversal. If that PD Array was already reached in AM, PM will just run out lunch hour highs/lows.

If the PM session takes lunch hour SSL/BSL or AM session SSL/BSL is dependent on the AM session BSL/SSL. If these lows/highs reached into a 15m PD array inside a 4h/Daily PD array PM will just run out lunch hour highs/lows.

How to know if the PM session will run lunch or intraday highs?

HTF PD array hit in AM session = Lunch highs likely to be run.
HTF PD array NOT hit in AM session= PM session  could run the intraday high, hit the HTF Premium array, and then reverse.

 

Quoted from:
Michael J. Huddleston (2017) - ICT Mentorship Core Content - Month 10 - Index Futures - Projected Range & Objectives. (video) 

 

See also:

 Darya Filipenka (2023) - ICT Mentorship Core Content - Month 10 - Index Futures - Index Trade Setups.

Darya Filipenka (2023) - ICT Deep Dive Into Institutional Order Flow.

 Michael J. Huddleston (2015) - ICT Intraday Trading Templates.

ICT Weekly Seek & Destroy Manipulation Profile | Michael J. Huddleston

 The Weekly 'Seek & Destroy' Range Manipulation Profile a.k.a. the 'Retail Traders Graveyard'.

The Weekly 'Seek & Destroy' Marker Maker Range Manipulation Template with either a bullish or a bearish Friday is a neutral or low probability market profile. The manipulation is taking place where price is consolidating Monday through Thursday, running shallow stops under and above the intra-week highs and lows, then runs the intra-week high/low and expands higher/lower into Friday. 

 

 

How to anticipate it? When the market is awaiting major news announcements in the second half of the week - especially after one or more directional wide-range weeks (see also the daily 'London Swing to Seek & Destroy' Template).

Reference:
Michael J. Huddleston (2017) - ICT Mentorship Core Content - Month 07 - Defining Weekly Range Profiles. (video)

Darya Filipenka (2024) - ICT Market Maker Buy Model and Sell Model (MMXM).

Daye (2024) - The Quarterly Theory. 

 Michael J. Huddleston (2015) - ICT Daily Range Profiles & Intraday Trading Templates.

 Darya Filipenka (April 3, 2024) - ICT Trading on NFP and FOMC Days.

Darya Filipenka (February 5, 2024) - Implementing Economic Calendar Events.

David Hickson (Februry 05, 2024) - News Events & Financial Markets. (video)

 Michael J. Huddleston (June 20, 2023) - ICT Consolidation Raid on News Release Template.
Stacey Burke (March 14, 2023) - Pump and Dump Patterns after Major News Release.

The Three Day Cycle & Parabolic Trade Setups | Stacey Burke

There are only three things price can do:
1. Breakout from a Range and Trend.
2. Breakout from a Range and Reverse.
3. Trading Range between Highs and Lows.

 

 1. Structure / Pattern

•  Do we have any larger geometrical patterns?
•  Head and Shoulders / Sell (Reverse Head and Shoulders / Buy)
• Descending Triangle (Sell) Ascending Triangle (Buy)
• Double Bottoms (Buy), Double Tops (Sell)
• Rectangles (Continuation / Reversal)
• Helps us identify geometric patterns for potential measured move profit targets for asymmetrical risk / reward.

I am mainly focused on horizontal ranges no matter what the geometrical pattern is. (The high and the low of the structure, typically this will be numbered “boxes” of 25-50-100 pips.) Numbers are horizontal. I DON’T TRADE DIAGONAL TREND LINE BREAKS.

2. High of the Day (HOD) / Low of the Day (LOD)

 

Where is the high, where is the low? There is a high and a low that the market is trading inside of. The market is either in a consolidation or a break out. The current HOD and LOD may be inside of a larger rectangle.

3. Timings

 

My focus is on the 3 hour window. 1 hour before the equity markets open, the hour of the equity markets open, and the hour after the equity markets open. Hence 12 - 15 minute candles.

• ASIA 8-11 pm NY EST
• EUR / LONDON 2-5 am NY EST
• NEW YORK 8-11 am NY EST

This allows me to have laser-like focus for some simple recurring setups that occur frequently enough for selling, buying or trend trading setups. This repeatable cycle is recurring in all three 12 candle windows. Whether or not the range, the pattern and a good risk / reward trade setup is in each window is unpredictable.

4. Round Numbers

 

Typically these trades will come off of round numbers, specifically 00’s and 50’s. The quarter levels, 25 and 75 will often be a “stop hunt” extension of a 50 or 00 trading box.

5. Price Behaviour for Trade Setups

 

I look for engulfments and pin hammers. These can be “with trend” trades, or reversals, for stop hunts or in a trading range.I look to ENTER the majority of my trades “AT OR NEAR” number, i.e. 25, 50, 75, 00. Sometimes I may limit order these trades, others I may just get filled at market.

• “M” PATTERNS - TYPE 1,2,3
• “W” PATTERNS - TYPE 1,2,3

6. Risk Management / Profit Targets

 

My average STOP LOSS is 1 ATR. For most of the pairs it will be 20 pips. The GBPAUD, GBPNZD may be 25. Depending on the level of volatility on the day, on the pair, it may be a bit more or less give or take. Typically though, I am looking for a 1 bar stop. Position sizing can depend on the type of setup, and the size of stop loss.

The minimum PROFIT TARGET is usually 50 pips. Sometimes a market may hit a previous day’s high or low, or the current day’s high or low, OR SIGNIFICANT ROUND NUMBERS, 00, 50, and the market may stop there. I may only be up 40 pips. When those levels are prominent, it may be necessary to adjust that target on the day, based on HOW PRICE BEHAVES when it gets to those levels. Other trades (Measured Moves) may be in the area of 50-75 or a 100 or more pips. Again, depending on the setup and how that pair is trading on the day.

7. Trade Management / Self Management

 

Once I am in the trade, I will fight every urge that I have to interfere with it. I review the trade setup and thesis that I have for the trade. I monitor the behaviour initially based on my thesis. I will typically leave the screen, or watch, and monitor myself, self talk, do meditation, and possibly review the other pairs to identify any other setups.

 

I will normally NOT ADJUST my stop loss to BREAK EVEN UNTIL, the market has broken a high or low boundary, ( I wait for the 15 min candle to close) OR it has CLOSED 30 pips or more, breaking into the next quarterly range. At 40 pips, depending on if the market has moved (fast or creeping) I will potentially look to LOCK IN 40 pips if the market has “two-sided” trading occurring near my profit target. So, to clarify, if it has spent 30 minutes near my target without hitting it, I will be watching closely to “LOCK IN” profits, in case the market is preparing to reverse. When you are up 40 pips, YOU NEED TO GET PAID.

 

Quoted from:

 Stacey Burke - 50 Pips a Day - Basic Rules - 12 Candle Window - 15 Minute Charts.

 

 Dump & Pump Pattern.

 Pump & Dump Pattern.

 

Reference:

Stacey Burke Trading - YouTube Channel.

Stacey Burke (2022) - Best Trade Setups Playbook.

Stacey Burke related articles on TPR.

Aksel Kibar (Jan 01, 2022) - Classical Chart Patterns in Global Equity Markets.

Peter L. Brandt & Bruce Babcock Jr. (1990) - Trading Commodity Futures with Classical Chart Patterns.

 

Stacey Burke - Three Day Trading Setups.

 

Aksel Kibar - Type 1 Breakout: Breakout NOT followed by Pullback.

 

Aksel Kibar - Type 2 Breakout: Breakout followed by Pullback.

Aksel Kibar - Type 3 Breakout: Breakout followed by hard Re-Test of Pattern Boundary.

And then there is the so called 'Failed Breakout' when price fails to continue

moving in the breakout's direction and instead reverses course.

S&P 500

 

S&P 500 (monthly bars - quarterly, monthly ranges) 

 

S&P 500 (weekly bars - quarterly, monthly, weekly ranges)

  Five weeks of rise. Move above July 27, 2023 quarterly high makes last quarter of 2023 

an Outside Quarter Range (as in NDX and DJI already). March 27, 2022 high next quarterly level.

 

S&P 500 (daily bars - monthly, weekly, daily ranges)

 Most recent example of outside quarterly reversal in January 2022; to the downside:

quarterly levels breached, daily and weekly reversals triggered. 

 

89.8% of S&P 500 stocks above 20 day moving average.

 Dec 4 (Mon) Moon at apogee and Mercury at  greatest elongation east (previous examples HERE).

Third lunar quarter starting Dec 5 (Tue). Tuesday to Friday major red news.

Weekly Opening Range Breakouts & Daily Range As Multiple Of Asian Range

 

Reference:
Stacey Burke (2023) - Trading Inside or Outside the Daily and Weekly Range.
TPR (2023) - The Weekly Opening Range & ICT Weekly Range Profiles.

 

 The ICT 2022 Mentorship Trading Strategy.

US Stock Indexes | Shallow Retracement Into Early-Mid-December Now Likely

Dow Jones Industrial Average (weekly bars)

Dow Jones Industrial Average (daily bars)

Monthly weekly and daily trends are up. 

S&P 500 (weekly bars)

S&P 500 (daily bars)

Eleven days, three levels and nearly 6 * ATR above the re-accumulation low of November 9.

 

Nasdaq 100 (weekly bars) 

Nasdaq 100 (daily bars) 

CNN Fear & Greed Index (daily bars).

 NYSE McClellan Oscillator (daily bars)

 

CBOE Volatility Index (monthly bars). Very close to multi-year lows.

SPX Put/Call Ratio = 1.63 for Nov 24 2023.

 

 Seth Golden (Nov 25, 2023):
The Trifecta of Overbought Conditions:
92% of SPX above 20-DMA, highest in 2+ yrs
McClellan Oscillator > 80+
S&P 500 2 std. above 50-DMA (RSI also 70+)

 

 

 

Four weeks+ of price expansion beyond daily, weekly and quarterly levels. Last week narrow daily and weekly ranges. Multi-month inflation melt-up? Possible. Allen Reminick suggests a creep up into November 27 (Mon) or December 1 (Fri) followed by some rather shallow 23-50% move down into December 8 or mid-month, some X-mas rally, sideways into January 12 and up into March-April 2024. Possible. [ Allen Reminick (Nov 20, 2023) - S&P 500 Projection Into June 2024 ]

 

See also:

Richard Wyckoff's Distribution Schematics.