Toby Crabel’s Bull Hook Trading Strategy Tested | Ali Casey

As an algo trader, I value patterns for their ease of programming and testing, which allows for the development of robust trading strategies. Today, we'll explore bull and bear hooks, patterns that can vary in details but generally serve to catch traders on the wrong side. Toby Crabel, Joe Ross, and Thomas Bulkowski, among others, have variations of these patterns.

Toby Crabel's original definition of the Bull Hook pattern:

» A Bull Hook occurs on Day 2. A Bull Hook is defined as a day with a higher open than the 

previous day's high followed by a lower close with a narrowing daily range. The next day (Day 1), 

a trade is taken on the initial move off the open, preferably to the upside. «

 

Toby Crabel's original definition of the Bear Hook pattern:

  » Bear Hook is a day in which the open is below the previous day's low and the close 

is above the previous day's close with a narrow range relative to the previous day. As implied by 

the name there is a tendency for the price action following a Bear Hook to move to the downside. «

The Bull Hook pattern has two main forms:

Bull Hook 1: In a downtrend, the pattern is identified when today's bar is an up bar with a smaller range than the previous day and is an inside day (high lower, low higher than the previous bar). We buy with a stop order above the high of this bar.
Bull Hook 2: Here, today's bar is a down bar with a smaller range than the previous day, opening above the previous high and closing below the previous close. This pattern involves just two bars.

For testing, I used TradeStation with S&P 500 e-mini futures data. The backtest for Bull Hook 1 was disappointing, showing a loss with only 15 trades, which seemed unusual given its pullback nature. A deeper analysis suggested that the specific conditions, particularly the inside day and green bar requirements, were limiting trades. By removing some conditions, like the inside day and green bar, and focusing on a simpler pullback strategy, the results improved significantly with about 200 trades and positive performance metrics. For Bull Hook 2, the test also yielded fewer trades than expected, which might be attributed to its breakout nature, not performing well on the S&P 500. Simplifying the conditions here also improved the results somewhat, though it remained less effective. The Bear Hook pattern, when flipped for long trades, performed better but still had a low trade count. Removing some conditions and simplifying it increased the trade count and improved performance. While both Bull Hook patterns had potential, their effectiveness was highly dependent on specific conditions and the number of trades generated. Simplifying the patterns often led to better results.

Reference:
Ali Casey (July 28, 2024) - The Secrets of Toby Crabel’s Bull Hook Trading Strategy Exposed. (video)
 Toby Crabel (1990) - Day Trading With Short Term Price Patterns And Opening Range Breakout.
MyPivots.com (2024) - Scanner for Toby Crabel Price Patterns in the E-mini S&P 500 Futures. 

 

See also:

Thomas Bulkowski (2013) - Hook Reversal, Uptrend.

 Thomas Bulkowski (2013) - Hook Reversal, Downtrend.

Joe Ross (1991) - Trading the Ross Hook.

Slava Loza (2021) - How to Trade the 1-2-3 Reversal and the Ross Hook Patterns.

Thomas Bulkowski on Hook Reversals in an Uptrend and in a Downtrend.

Recent Toby Crabel Price Pattern Setups in the E-mini S&P 500 Futures

 S&P 500 E-mini Futures (daily candles) - (1) - (2) - (3) - (4)

(1)   2BNR is the 2 Bar Narrow Range: If the 2-day-range (the higher of the 2 highs less the lower of the 2 lows) is the narrowest 2-day-range in the last 20 trading sessions then we are currently sitting on a 2BNR.
(2)   3BNR is the 3 Bar Narrow Range: If the 3-day-range (the higher of the 3 highs less the lower of the 3 lows) is the narrowest 3-day-range in the last 20 trading sessions then this is true.
(3)   » Next time you see an Outside Day with a down close lower than the previous day, don't get scared, get ready to buy ! «
(4) 4BNR and Inside Day with an Up-Close -  narrowest weekly range of last 7 ... weekly directional change already due? ... or early September?

Reference:
Toby Crabel (1990) - 2-Bar Narrow Range Setup.
Toby Crabel (1990) - The Principle of Contraction/Expansion.
Toby Crabel (1990) - Definition of Price Patterns.
Larry Williams (1998) - Outside Bar Trading Setups.

Larry Williams (1995) - An Outside Look at Inside Days.

D'onte Goodridge (2022) - Interbank Price Delivery Algorithm (IPDA) Data Ranges.

D'onte Goodridge (2023) - Structural Characteristics of Bullish & Bearish Months.

TPR (July 25, 2024) - Cosmic Cluster Days | August 2024.

Martin A. Armstrong (July 14, 2024) - Next weekly directional change during week of August 26.

MyPivots.com (2024) - Scanner for Toby Crabel Price Patterns in the E-mini S&P 500 Futures.

 

2-Bar Narrow Range Setup | Toby Crabel

2-Bar Narrow Range (2BNR)  represents a condensation of the market concept called congestion or contraction. Contraction is subsumed within the market Principle of Contraction/Expansion which states that the market, having a specific nature, is constantly changing from a period of movement to a period of rest and back to a period of movement. This interchange between the phases of motion and rest are constantly taking place with one phase directly responsible for the other's existence. 2-Bar NR represents this market principle and provides a means of quantifying contraction in any market environment. This is possible because of the open-ended nature of the concept 2-Bar NR. 

 

 2-Bar Narrow Range (2BNR) in the S&P 500 on June 26, 2024.

If the 2-bar range is the narrowest range from high to low of any two day period relative to

any two day period within the previous twenty days, we are sitting on a 2BNR trading setup for June 27.

Because it is not dependent on a constant measurement it represents contraction in a volatile or narrow market period. In other words, contraction is a relative condition that can occur even in a volatile market. Once a market concept is formulated it is tradable. An ORB (Opening Range Breakout) trade is taken the day after the 2-Bar NR formed. An ORB trade is entered at a predetermined amount above or below the opening range (stretch), that is the range of prices that occur in the first 30 seconds to 5, 15 or 30 minutes of trading. 

 

The assumptions are that with a contraction of this type trending action would follow the direction of the breakout, and that because this pattern exhibits a more defined contraction that trending would take place over the next several days also. It is advantageous if the 2-Bar NR is holding at an important angle of support/resistance, including trendlines, when it is formed. Once the market has moved away from the open in one direction after a 2-Bar NR, it should not return to the opening price. If it were to do so, that would disqualify the day as a trend day. Trending action is ideal and is expected after the pattern.

 

[Crabel's ORB system doesn't work in today's markets. Different entry criteria need to be applied.]

Reference:

Toby Crabel (1990) - Day Trading With Short Term Price Patterns And Opening Range Breakout.

Toby Crabel (1990) - 2-Bar NR and ORB.

The Principle of Contraction/Expansion | Toby Crabel

 » The principle of Contraction/Expansion is defined as the market phenomenon of change from a period of rest 

to a period of movement back to a period of rest. This interaction between the phases of motion and rest 

are constantly taking place, with one phase directly responsible for the others' existence. «  

Toby Crabel, 1990
 

In his study 'Day Trading with Short Term Price Patterns and Opening Range Breakout' Toby Crabel defined the following range contraction and expansion patterns:

NR4 - The narrowest daily range relative to the previous three day’s daily ranges compared individually.
NR7 - A day with a daily range that is narrower than the previous six day’s daily ranges compared individually.
WS4 - (Widespread 4) A day with a daily range that is larger than any of the previous three day’s daily ranges.
WS7 - (Widespread 7) A day with a daily range that is larger than any of the previous six day’s daily ranges

             compared individually.

His key findings were: A cumulative total of Gross Profits for the contraction patterns vs expansion patterns on trades in the direction of the move off the open showed $710,000 for contractions on 7,313 trades and $102,000 for expansions on 7,524 trades. Profits were seven times larger for ORB (Opening Range Breakout) trades after contractions than expansions.

» Clearly something is going on here. The suggestion from these results is that one should be looking to go with a forceful move off the open after a contraction and not willing to do so after an expansion. In fact, fading price action off the open, with trend, after an expansion is a consideration. Other patterns can help with the decision on whether to fade a move off the open along with previously mentioned market context. If nothing else, one should be aware of the dangers of ORB trades the day after a big directional day. Caution is necessary after expansions. This is when the most attention is given to the market by the novice trades who invariably get caught in whipsaws and trendless markets. «  

Bitcoin - Inside Bar Narrow Range 4 (ID/NR4)
in monthly, weekly, daily and 4 hour bar charts.

» An object at rest stays at rest and an object in motion stays in motion with the same speed 

and in the same direction unless acted upon by an unbalanced force. «
Isaac Newton's 'First Law of Motion', 1687

 

Reference:
Toby Crabel (1990) - Day Trading With Short Term Price Patterns And Opening Range Breakout.

Jack Corsellis (2023) - Toby Crabel - Secret Trading Strategies of Billionaire Trader Revealed. (video)

Jarrod Goodwin (2023) - Testing Toby Crabel's Narrow Range NR4 Breakout Strategy on Daily and 4 Hour Time Frames. (video)
Ali Casey (2023) - Toby Crabel's Narrow Range NR4 Pattern. (video)

An Outside Look at Inside Days | Larry Williams

First, lets define what constitutes an inside day. An Inside Day is exactly the opposite of an Outside Day. That is, today’s high is less than yesterday’s high and today’s low is greater than yesterday’s low. Hence the terminology inside day, as all of today’s price range or trading activity took place inside of yesterday’s range. An inside day is usually thought to be an indication of congestion. A price could not exceed the previous day on the upside nor could it break below the previous day’s low on the downside.

 » Inside Days are one of the most reliable forecasting patterns to occur in the marketplace. «

 

Chartists and authors have not paid very much attention to the inside days over the years. They have made note of them, but this is the first time, to my knowledge, that anyone has made a serious study of the impact of inside days. And, wouldn’t you just know it … inside days are one of the most reliable forecasting patterns to occur in the marketplace!

  » In a study of nine major commodities covering 50,692 trading sessions, I noted 3,892 inside days,

suggesting we will see these days appear about 7.6 percent of the time. «
Larry Williams, 1998.

There does seem to be some validity to this. The following chart shows what happens when we have an inside day with a down-close while prices are lower than they were 10 days ago. In the Standard and Poor’s, 71% of the time you were higher the next day. This may not even be as significant as the fact that 71% of the time you were higher 20 days after this occurrence. In the Value Line, price is higher 50% of the time after the occurrence, and in Treasury Bonds it’s higher 75% of the time. The pattern in Silver was not nearly as bullish, which surprises me because I had used this trading technique in Silver with some success … which just goes to show you! In Silver, on 36% of the time you were higher 20 days following the occurrence of the pattern. Soybeans were higher 57% of the time, Bellies 50% of the time and the Swiss Franc, where so far we have not found a pattern that forces prices higher, you were up only 22% of the time.

'Inside Days in the S&P 500' - Toby Crabel, 1990.

For a moment though, let’s take a look at just the occurrence of an inside day. What happens when we simply have an inside day with a down-close? Does that, on its own merit, forecast any significant market activity? The results are on the next few pages [of 'The Future Millionaire's Confidential Trading Course']. What can you find?

Then there’s the other side of this coin. What happens if we have an inside day with an up-close? Does this forecast positive action? It appears that it does to some extent. Study the tables for yourself. I have gone to the computer to give you the results for almost all possible configurations of the inside days. While, quite frankly, much of the data suggests random-gibberish-behavior, others are relationships that you can find and successfully trade with. What you need to focus on here is not that the patterns will always work for you, but that patterns, like methods, systems and tools, will give you the much needed odds that lead to successful speculation.

 

I have not exhausted all possible ways of looking at inside days with down-closes, though I have looked at the majority of the relationships one can study. There are others. As an example, what happens if the prices are higher, or if prices are lower following an inside day five days later. Does that mean that the down trend will continue? One could also ask the questions about an outside day following an inside day. Is this a particularly bullish pattern? (It is.) As you can see, your opportunity for research here is unlimited. If you have a computer, some data, and a desire to study the markets, here is fertile ground for you to come up with your own great ideas.

Quoted from:
Larry Williams (1995) - An Outside Look at Inside Days.

An excerpt from 'The Future Millionaire's Confidential Trading Course'.

 

See also:

Toby Crabel (1990) - Day Trading With Short Term Price Patterns and Opening Range Breakout. 

Toby Crabel (1990) - Inside Days in the S&P 500. 

Larry Williams (1998) - Long-Term Secrets to Short-Term Trading, 2nd Edition. 

Johnan Prathap (2011) - Three-Bar Inside Bar Pattern.

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.

NR4 & NR7 (Narrow Range 4 & 7) and ID (Inside Days) | Toby Crabel

Narrow range patterns were described by Tony Crabel in his book, "Day Trading with Short Term Price Patterns & Opening Range Breakout". Even though it was published in 1990, many of Crabel's concepts and set-ups are still effective, and in particular his NR4 (Narrow Range 4) and NR7 (Narrow Range 7) patterns became quite popular with short-term traders. The idea for set-ups is similar to the Bollinger Band Squeeze or Short-Squeezes and Long-Squeezes in general: a volatility contraction is followed by a volatility expansion; narrow range days mark price contractions that precede price expansions. The NR7 day and the NR4 day as such are 'neutral' when it comes to future price direction, and other tools need to be employed to determine directional bias. Because NR4/NR7 days are relatively commonplace and the range is small by definition, the chances of whipsaw are above average. A break above the NR7 high can fail and be followed by a break below the NR7 high. Just be aware of this probability and keep the bigger picture in mind. In other words, be wary of sell signals within a bullish pattern, such as a falling flag or at a support test.

 

Examples of Narrow Range 7 Inside Days (IDnr7) in the Nasdaq.

Traders will want to qualify NR7 signals because they are quite frequent. A typical instrument will produce dozens of NR7 days in a twelve month period and a daily scan of US stocks will often return hundreds of stocks with NR7 days. Traders can increase or decrease the number of narrow range periods to affect the results. A decrease from NR7 to NR4 would increase the number of instruments fitting the criteria, while an increase from NR7 to e.g. NR20 would decrease the number of signal days. Consider NR7 and NR4 days that are at the same time Inside Days (IDnr4, IDnr7) also as signal days (see chart above).

Strategy: This strategy starts with the day's range, which is simply the difference between the high and the low. Crabel used the absolute range, as opposed to the percentage range, which would be the absolute range divided by the close or the midpoint. Because we are only dealing with four and seven days, the difference between the absolute range and percentage range is negligible. Crabel focused on two different narrow range timeframes: four days and seven days. An NR4 pattern would be the narrowest range in four days, while an NR7 would be the narrowest range in seven days. It is a very short-term pattern designed to initiate a trade based on an "opening range breakout", which is another term from Crabel's book. Look for an upside breakout when prices move above the high of the narrow range day and a downside breakdown when prices move below the low of the narrow range day.

Bull Signal:

1. The daily bias is bullish.
2. Identify a NR4, a NR7, an IDnr4 or an IDnr4 day.
3. Buy on move above high of narrow range day high.
4. Set trailing stop-loss.

Bear Signal:

1. The daily bias is bearish.
2. Identify a NR4, a NR7, an IDnr4 or an IDnr4 day.
3. Sell on move below low of narrow range day low.
4. Set trailing stop-loss.

Targets: Because this is a short-term setup, it is important that the trade starts working right away. Failure to continue in the direction of the signal is the first warning. After a buy signal, a move below the low of the narrow range day would be negative. Conversely, a move above the high of the narrow range day would negate a sell signal. Consider profit targets and stop-losses. Crabel took profits quite quickly, usually at the close of the first trading day or on the first profitable close. Again, this is very short-term-oriented and might not be suitable for all traders. Alternatively, profits can be taken near the next resistance levels or a percentage target can be used. Base stops on previous highs and lows, the Average True Range (ATR), etc. For example, the stop-loss on a long position could be set two ATR values below current prices and trailed higher.

 

Reference:
Toby Crabel (1990) - Day Trading With Short Term Price Patterns and Opening Range Breakout.

Toby Crabel (1990) - Inside Days in the S&P 500.

 Oddmund Groette (2023) - NR7 Trading Strategy (We Improved It).
Oddmund Groette (2023) - Inside Day Trading Strategy – Does It Work? (Backtest). 

TPR (2023) - Trend Continuation Entry Strategies.

Range Extension & Contraction - Reversals - Time Cycles | Stacey Burke

Stacey  Burke (Dec 21, 2022) - Cheat Code For The High and Low of The Year (Advanced Technical Analysis).

 

oOo

 

Old Baron Rothschild's recipe for wealth winning applies with greater force than ever to speculation. Somebody asked him if making money in the Bourse was not a very difficult matter, and he replied that, on the contrary, he thought it was very easy. "That is because you are so rich," objected the interviewer. "Not at all. I have found an easy way and I stick to it. I simply cannot help making money. I will tell you my secret if you wish. It is this : I never buy at the bottom and I always sell too soon."

Jesse L. Livermore

oOo

Quoted from:

Edwin Lefèvre  (1923) - Jesse Livermore - Reminiscences of a Stock Operator.

 

See also:

 Stacey Burke (2022) - Best Trade Set Ups Playbook.

Jesse-Livermore.com (2022) - Patterns in Stock Prices - Jesse Livermore’s Trading Methods.

Franklin O. Ochoa Jr. (2010) - Secrets of a Pivot Boss - Revealing Proven Methods for Profiting in the Market. 

Richard D. Wyckoff (1922) - Jesse Livermore's Methods of Trading in Stocks.

 

Weekly Cycle and Market Structure in Gold (1 hour chart):
Daily and Weekly Highs and Lows, Daily and Weekly Pivot Levels, Inside Days, Outside Days,
Daily and Weekly Accumulation-, Extension-, and Distribution-Levels, Breakouts, False Breakouts,
V Patterns, M & W Patterns, Peak Formation Highs and Lows.

The Four Guiding Principles of Market Behavior | Momentum & Trend

Principle 1:     Trend is More Likely to Continue its Direction than to Reverse

With price established in a clearly defined trend of higher highs and higher lows, certain key strategies and probabilities begin to take shape. Once a trend is established, it takes considerable force and capitalization to turn the tide. Fading a trend is generally a low-probability endeavor and the greatest profits can be made by entering reactions or retracements following a counter trend move and playing for either the most recent swing high or a certain target just beyond the most recent swing high. An absence of chart patterns or swings implies trend continuation until both a higher high and a higher low (vice versa for uptrend changes) form and price takes out the most recent higher high.

Be aware that recent statistical analysis of market action (from intraday to 20 day periods) over the last five years shows that mean reversion, rather than trend continuation is more probable in many equities/indices (as shown by more up days followed by down days than continuation upwards). For the current market environment, until volatility returns (as it may be doing now), this rule may be restated, “Trends with strong momentum show favorable odds for continuation.”

 

Principle 2:     Trends End in Climax (Euphoria/Capitulation)

Trends continue in push/pull fashion until some external force exerts convincing pressure on the system, be it in the form of sharply increased volume or volatility. This typically occurs when we experience extreme continuity of thought and euphoria of the mass public (that price will continue upwards forever). However, price action – because of extreme emotions – tends to carry further than most traders anticipate, and anticipating reversals still can be financially dangerous. In fact, some price action becomes so parabolic in the end stage that up to 70% of the gains come in the final 20% of the move. Markets also rarely change trends overnight; rather, a sideways trend or consolidation is more likely to occur before rolling over into a new downtrend.

 

Three Things Markets do:
1. Breakout and Trend.
2. Breakout and Reverse (False Breakout).
3. Trading Range (High and Low).

 

 

Principle 3:     Momentum Precedes Price

Momentum – force of buying/selling pressure – leads price in that new momentum highs have higher probability of resulting in a new price high following the next reaction against that momentum high. Stated differently, expect a new price high following a new momentum high reading on momentum indicators (including MACD, momentum, rate of change). A gap may also serve as a momentum indicator. Some of the highest probability trades occur after the first reaction following a new momentum high in a freshly confirmed trend. Also, be aware that momentum highs following a trend exhaustion point are invalidated by principle #2. Never establish a position in the direction of the original trend following a clear exhaustion point.

 

Principle 4:     Price Alternates Between Range Expansion and Range Contraction

Price tends to consolidate (trend sideways) much more frequently than it expands (breakouts). Consolidation indicates equilibrium points where buyers and sellers are satisfied (efficiency) and expansion indicates disequilibrium and imbalance (inefficiency) between buyers and sellers. It is much easier to predict volatility changes than price, as price-directional prediction (breakout) following a low-volatility environment is almost impossible. Though low volatility environments are difficult to predict, they provide some of the best risk/reward trades possible (when you play for a very large target when your initial stop is very small – think NR-7 Bars).

Various strategies can be developed that take advantages of these principles. In fact, almost all sensible trades base their origin in at least one of these market principles: breakout strategies, retracement strategies, trend trading, momentum trading, swing trading, etc. across all timeframes.

 

Concept Credit for arranging the four principles: 

Linda Bradford-Raschke (2000) - Swing Trading and Underlying Principles of Technical Analysis. 

In: Rick Bensignor (2000) - New Thinking in Technical Analysis: Trading Models from the Masters.

 

See also:

Richard W. Schabaker (1932) - Technical Analysis And Stock Market Profits: A Course In Forecasting.

Robert Edwards & John Magee (1948) - Technical Analysis of Stock Trends.

Arthuer A. Merrill (1980) - M&W Wave Patterns.

Peter L. Brandt (2011) - Diary of a Professional Commodity Trader.

Aksel Kibar (2021) - Three Types of Breakouts. 

Stacey Burke (2021) - Weekly Template - Three Things Markets do.

TPR (2022) - The Bullish & the Bearish Market Maker Cycle.
TPR (2022) - Daily Range = Accumulation + Manipulation + Expansion + Distribution (AMD).
TPR (2022) - Daily and Weekly Market Maker Cycles.
TPR (2022) - 3 Bar Patterns- The Smallest Fractals of Market Structure.

 

 

 

Swing Trading - Rules and Philosophy | Linda Bradford Raschke

My style is based on the 'Taylor Trading Technique', 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 of the short-term nature of this technique, swing traders must adhere to some very basic rules, including: 

• If the trade moves in your favor, carry it overnight--the odds favor follow-through. Expect to exit the next day around the objective point. An overnight gap presents an excellent opportunity to take profits. Concentrating on only one entry or one exit per day relieves the pressure. 
• If your entry is correct, the market should move favorably almost immediately. It may come back to test and/or exceed your entry point a little, but that's OK. 
• Do not carry a losing position overnight. Exit and play for better position the next day. 
• A strong close indicates a strong opening the following day. 
• If the market doesn't perform as expected, exit on the first reaction. 
• If the market offers you a windfall of big profits, take them to the bank on the close. 
• If you are long and the market closes flat, indicating a lower opening the following day, scratch or exit the trade. Play for better position the next day. 
• It is always OK to scratch a trade! 
• Use tight stops when swing trading (wider stops when trading trend). 
• The goal always is to minimize risk and create "Freebies." 
• When in doubt--get out! You have lost your road map and your game plan! 
• Place your orders at the market. 
• When the trade isn't working, exit on the first reaction. ANTICIPATE!

 

Traders Laboratory (2007) - Taylor Trading Technique

How does one anticipate entry? The following may be indicators of a buy day or a sell day:

The Count: Start searching for a buying day 2 days after a swing high or, conversely, a shorting day 2 days after a swing low. Ideally, the market will move in complete 5-day cycles. (In a strong trend, the market will move 4 days in the primary direction and only 1 in reaction. Thus, one must seek entry 1 day earlier.)
 
"Check Mark" on the Test: The potential entry is sought opposite, or contrary to, the previous day's close. If looking to buy (sell), one first wants the market to "test" the previous day's low (high), preferably early in the day, and then form a trading pattern that looks like a "check mark" (see examples). This pattern sets up and establishes a "double stop point" or strong support. If entering a market with only a "single stop point" or support formed by today's low only, exit on the same day--the trade is clearly against the trend.

Close vs. Open: The close should indicate the following day's opening. When a market opens opposite what is expected or indicated by the trend, one may first look to "fade" it--but must take profits quickly. Then look to reverse!

Support (Resistance): Is today's support (resistance) higher or lower than yesterday's?

Swing Measurements: Where is the market relative to the last swing high or low? Look for swings (up or down) of equal length, and for retracements of equal percentage.

No matter in what time frame, always look for supply at tops and support at bottoms. Penetrations should be accompanied by volume and activity. Expect trends, either up or down, to last for either 2 or 4 weeks. The following conditions are fairly reliable indicators for the start of one of these trends (I personally skip the first buy or sell swing when one occurs because the move ensuing could be quite strong): 

• Narrowest range in the last 7 days 
• 3 consecutive days with small range
• The point of a wedge
• A breakaway gap 
• A rising ADX (14-period) above 32

Practice: Because a certain amount of confidence in any technique is required to trade it consistently, paper trading can cultivate the faith necessary to recognize and trade pattern repetition. Although the temptation to try too many different styles and patterns always exists, one must strive ultimately to trade in just one consistent manner or at least to integrate techniques into your own unique philosophy.
 

System Characteristics: Certain points about trading short-term swings deserve note. Understanding the nature of short-term systems can help you recognize the psychological aspect of trading. When consistently following a short-term system, you should expect a very high win/loss ratio. Though the objectives with this style of swing trading appear conservative, you will almost always incur "positive slippage". In all systems, winners are skewed. Even though making steady profits, 3-4 really big trades may actually make the month. It is vitally important to always "lock in" your trades. Don't give back profits when short-term trading. You may be astonished at just how big some winners may be from catching the swings "just right!"
 

[...] Finally, I want to leave you with what I believe are two Golden Rules, applicable to all traders but, of essential importance to short-term swing traders: 

• NEVER, ever, average a loss! Sell out if you think you are wrong. Buy back when you believe you are right.
• NEVER, NEVER, NEVER listen to anyone else's opinion! Only YOU know when your trade isn't working.

 Quoted from:
Linda Bradford Raschke (2001) - Swing Trading - Rules and Philosophy

 

See also:

Linda Bradford-Raschke (1995) - Capturing Trend Days

George Douglass Taylor (1950) - The Taylor Trading Technique

 YouTube - The Taylor Trading Technique

George Angell (2002) - Sniper Trading: Essential Short-Term Money-Making Secrets for Trading

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

Linda Bradford Raschke (2009) – 50 Time Tested Classic Stock Trading Rules

Steve Burns (2012) - Linda Raschke’s 12 Technical Trading Rules  

Linda Bradford Raschke (2015) – The Taylor Trading Technique  

Linda Bradford Raschke and Damon Pavlatos (2020) - Timeless Trading Strategies

Traders Laboratory (2007) - Taylor Trading Technique

David D. Dube (2014) - The Three-Day Trading Cycle

Stacey Burke (2021) - The Three Day Cycle - Stalking the Best Trade Setups 

TPR (2018) - Contraction > Breakout > Expansion. Toby Crabel's Price Patterns