Forex trading is a lucrative investment opportunity that offers traders the possibility of earning high returns on their investments. The forex market is a highly volatile market, and traders need to have effective trading strategies to succeed in the market. One of the most effective trading strategies in forex trading is the Taylor Trading Technique. In this article, we will explain what the Taylor Trading Technique is and how to use it in forex trading.
What is the Taylor Trading Technique?
The Taylor Trading Technique is a trading strategy that was developed by George Douglass Taylor in the early 20th century. The Taylor Trading Technique is based on the idea that the forex market moves in cycles and that there are three phases to each cycle. These three phases are the accumulation phase, the distribution phase, and the markup phase.
The accumulation phase is the phase where smart money is accumulating assets. The distribution phase is the phase where smart money is distributing assets to the market. The markup phase is the phase where the market experiences a significant price increase due to high demand.
The Taylor Trading Technique aims to identify these three phases and profit from them. The technique is based on the assumption that the market follows a predictable pattern and that traders can use this pattern to make profitable trades.
How to Use the Taylor Trading Technique in Forex Trading
Step 1: Identify the Accumulation Phase
The first step in using the Taylor Trading Technique is to identify the accumulation phase. The accumulation phase is characterized by low trading volumes and a narrow trading range. To identify the accumulation phase, traders should look for a period of consolidation in the market. This period of consolidation is usually marked by a series of lower highs and higher lows.
Step 2: Identify the Distribution Phase
The second step in using the Taylor Trading Technique is to identify the distribution phase. The distribution phase is characterized by high trading volumes and a narrow trading range. To identify the distribution phase, traders should look for a period of consolidation in the market. This period of consolidation is usually marked by a series of lower highs and lower lows.
Step 3: Identify the Markup Phase
The third step in using the Taylor Trading Technique is to identify the markup phase. The markup phase is characterized by high trading volumes and a wide trading range. To identify the markup phase, traders should look for a period of consolidation in the market. This period of consolidation is usually marked by a series of higher highs and higher lows.
Step 4: Enter a Trade
Once the three phases have been identified, traders can enter a trade. Traders should enter a long trade during the accumulation phase, a short trade during the distribution phase, and a long trade during the markup phase.
Step 5: Set Stop Loss and Take Profit Levels
Traders should always set stop loss and take profit levels when using the Taylor Trading Technique. Stop loss levels should be set at the low of the accumulation phase for long trades and at the high of the distribution phase for short trades. Take profit levels should be set at the high of the markup phase for long trades and at the low of the markup phase for short trades.
Conclusion
The Taylor Trading Technique is an effective trading strategy that can help traders profit from the forex market. The technique is based on the idea that the market moves in cycles and that there are three phases to each cycle. Traders can use this information to identify profitable trading opportunities. However, traders should always remember that the forex market is highly volatile, and there is always a risk of losing money. Therefore, traders should always practice proper risk management and set stop loss and take profit levels when using the Taylor Trading Technique.
