The Taylor Trading Technique

Trading Taylor’s three day trading rules

I wanted to share with you some insights about the Taylor Trading Technique, a method I’ve explored quite a bit after Linda Raschke mentioned it in this video.

Anyway, it’s a bit of an old-school approach but has some timeless principles.

Let’s have a look and maybe it’s something you want to dig into further…

What is the Taylor Trading Technique?

Developed by George Douglass Taylor in the 1950s, this technique is all about identifying and capitalising on the market’s “natural rhythm.”

Taylor proposed that the markets move in a predictable three-day cycle:

  1. Buy Day – The market is likely at a low point, making it a good day to buy.
  2. Sell Day – Following a buy day, the market typically rises, creating an opportunity to sell at a higher price.
  3. Sell-Short Day – This is when you anticipate a market decline. If the market opens higher, it’s an opportunity to sell short.

I’ve simplified it here of course, but that was the basic premise.

And TBH I like the simplicity.

Before each trading day, I always ask the question “What is the day type likely to be

From there I can use the right strategies for the day type, or simply not trade.

Identifying the Cycle:

It takes some practice, but learning to identify these three-day cycles is key.

For instance, if I noticed a significant drop on Monday, I’d mark it as a potential Buy Day and prepare for the following days accordingly.

Flexibility:

As always with these things the cycle isn’t always textbook perfect.

Sometimes, a Sell Day turns into another Buy Day. The key is to be observant and adaptable.

Look at the strength of the daily trend, take into account econ data days, holidays, and the market’s keenness to expand and contract volatility.

Why Use It?

  • It’s a disciplined approach, reducing impulsive decisions.
  • It helps in understanding market patterns and behaviour.
  • It provides a structured framework for the day ahead, which is especially helpful for simplifying your method.

Remember, like any trading strategy, it’s not foolproof.

It requires practice, patience, and a good understanding of general context and price action.

But I do have a soft spot for these old-time-tested methods.

These guys didn’t have computing power, they used observation of human behaviour to come up with valuable guiding principles.

Here’s the Taylor Trading Concept in a book. The first part is almost useless, but the second has all the concepts.

Worth exploring…