SWING TRADE PRO

FOUNDATIONAL SWING TRADING CONCEPTS

with Frank Ochoa
COURSE AGENDA
PART I: PART II: PART III:
FOUNDATIONAL SWING TRADING TRADE AND RISK
SWING TRADING SETUPS AND ENTRY MANAGEMENT
CONCEPTS TECHNIQUES
Four Market Phases The Importance of Forecasting Accurate
Trade Location Targets
Understanding Value
Pro-Style Entry Scaling and Trailing
Identifying Value Techniques
Techniques
Opportunities
Intraday Entry Defining Trade Risk
Pivot-Based Moving
Techniques 5 Rules of Risk
Averages
Indicator-Based Setups Management
Pivot Range Analysis
Candlestick Setups Proper Position Sizing
Volume-Weighted
Average Price Range-Based Setups Defining Portfolio Risk
THE FOUR MARKET PHASES
THE PERSONALITY
OF MARKETS THEORY
The Personality of Markets Theory (PMT) states that stocks tend to
cycle through various personalities over time. Trade ONLY during the
most favorable cycles, as these provide the best opportunities.
• A well-behaved personality is likely to
remain well-behaved until it proves
otherwise

• A volatile, un-structured personality is

likely to remain as such, until it proves
otherwise

• Instruments will gradually switch

between phases over time
VOLATILE PERSONALITY

Volatile personalities make it difficult to

forecast future price behavior
WELL-BEHAVED

Well-behaved price structure helps

you better anticipate future price
movement, and the clean price
movement facilitates profitable trading
FOUR MARKET PHASES
The Four Market Phases were pioneered by Richard D. Wyckoff and
help to provide understanding of the various price cycles, which allows
for better market timing.

FOUR MARKET • Gives traders a “heads-up” on the

potential upcoming market phase
PHASES:
• Allows you to anticipate, and
1. ACCUMULATION prepare for, upcoming price
movement
2. DISTRIBUTION
• Traders that can recognize market
3. MARKUP phases are able to identify the best
profit-making opportunities
4. MARKDOWN • Tailor your approach to the phase
FOUR MARKET PHASES
3. Distribution

Re-Distribution
Re-Accumulation
4. Markdown

2. Markup
Accumulation

1. Accumulation
FOUR MARKET PHASES

Distribution

Markup

Markdown
Markup

Accumulation
BEST TIMES TO TRADE

Oftentimes the safest or best

times to trade are during the
Markup and Markdown phases
Markup

Markdown
Markup

These phases offer highly

confirmed unidirectional
trending price movement
ACCUMULATION
The Accumulation phase occurs when institutional investors begin
buying up substantial supply of a given stock, which creates
compression, and usually leads to a Markup phase.
• Institutions buy large amounts of stock
Contraction
over long periods of time, so as not to before
drive up the price Expansion
• A large trading range, or base, develops
as Institutions build their position

• Recognizing the Accumulation phase

gives insight into future opportunity

• Wyckoff: believes this phase is the

“force” behind the upcoming move
ACCUMULATION IS FUEL

The Accumulation phase should be seen

as a “necessity” in order for an established
Markup phase to develop; the bigger the
Accum, the bigger the Markup

Once in the Markup phase,

every pull-back becomes a high
probability value opportunity
CLASSIC ACCUMULATION

A more pronounced phase of Accumulation

generally leads to a bigger resulting Markup phase
ACCUM/RE-ACCUM

A period of Re-Accumulation can

extend the Markup phase, but it can
be difficult to decipher whether the
phase is Accumulation or Distribution
MARKUP
The Markup phase occurs after a period of Accumulation, and usually
leads to a sustained, trending move. This phase provides the BEST
opportunity for trading.

• Price breaks out of the Accumulation Expansion

phase, and begins trending higher after
Contraction
• The big money bought during the
Accum phase, now retail money joins in

• This is the most profitable time to buy,

and also the “safest” time to buy

• Wyckoff: believes this phase is the

direct result of the Accumulation phase
CLASSIC MARKUP

A more pronounced phase of Accumulation

generally leads to a bigger resulting Markup phase

Once a breakout from Accumulation

occurs, look to play high probability
reversals within the Markup phase
BEST TRADING OPPS

Many techniques and tools can be used to

identify pull-back opportunities, like moving
averages, VWAP, candlestick setups, and more!
TRANSITION TO MARKUP

Perhaps the most profound transition (and

easiest to identify) from Accumulation to Markup
starts with a breakaway gap out of range

Triggering this entry

can be extremely
profitable
DISTRIBUTION
The Distribution phase occurs when institutional investors begin slowly
liquidating (selling) their inventory of a given stock, thus creating
compression, which typically precedes the Markdown phase.
• Institutions begin selling large amounts
of stock over long periods of time, so
as not to disturb price

• A large trading range develops, as

Institutions liquidate their position

• Recognizing the Distribution phase

gives insight into future opportunity
Contraction
before
• Wyckoff: believes this phase is the
Expansion
“force” behind the upcoming move
DISTRIBUTION

Once in the
Markdown phase,
every pull-back
becomes a high
probability value
opportunity

The Distribution phase should be seen as

a “necessity” in order for an established
Markdown phase to develop; the bigger
the Distribution, the bigger the Markdown
DISTRIBUTION/RE-DIST

A period of Re-Distribution can

extend the Markdown phase, but it can
be difficult to decipher whether the
phase is Accumulation or Distribution
DISTRIBUTION

While the Distribution phase can be tricky

to decipher (from Accumulation), a series
of lower highs are usually a “tell”
MARKDOWN
The Markdown phase occurs after a period of Distribution, and usually
leads to a sustained, trending move. This phase provides the BEST
opportunity for trading.
• Price breaks out of the Distribution
phase, and begins trending lower

• The big money sold during the

Distribution phase, now retail money
joins in

• This is the most profitable time to sell

short, and also the “safest” time to sell Expansion
after
• Wyckoff: believes this phase is the Contraction
direct result of the Distribution phase
MARKDOWN

Trading in a
Markdown phase
is like shooting
“pull-backs”
in a barrel

A successful Markdown phase is usually

preceded by a good period of Distribution
MARKDOWN

Do you need a setup to trade this?

No, you just need an understanding of
market structure and value
STP AXIOMS
Many of Wyckoff’s basic tenets have become foundational standards of
technical analysis, including the concepts of accumulation/distribution
and the power of price and volume in determining price movement.

SWING TRADE PRO AXIOMS

1. The best price moves occur when there has been enough time to
allow for a period of accumulation or distribution

2. Only trade during the Markup and Markdown phases

• Buy pull-backs during the Markup phase (Discounts)

• Sell pull-backs during the Markdown phase (Premiums)

3. Avoid trading during periods of Accumulation or Distribution

UNDERSTANDING VALUE
PROFESSIONALS
UNDERSTAND VALUE
Professionals rely upon their ability to identify value opportunities, and
exercise discipline to only trade when good value is present.
• Quickly and accurately determining
value directly affects profitability

• Patience and discipline are the keys to

consistently trading value opportunities

• Requiring good value for EVERY trade

dramatically improves odds for success

• Trading value reduces risk and

maximizes the potential gain
AUCTION MARKET
THEORY
Auction Market Theory allows traders to make decisions based on
market-generated data that is a reflection of supply vs demand.
• The market operates solely to facilitate trade
• Price is a tool used to advertise value
• Price auctions up to motivate sellers, and down to
motivate buyers
• Price auctions higher until the last buyer has bought,
and auctions lower until the last seller has sold
• When buyers/sellers find an agreeable price, they
trade in large volume, thereby establishing “value”
VALUE BASICS
Pros assess value in order to identify when prices are at a discount or
premium. Identifying value is the cornerstone to profitable trading.

• Price is used as a tool to advertise value

• Value is the dominant variable in markets; changes constantly

• Price is valued differently in each timeframe

• Historical value maintains significance into the future

• Demand drives value; change in value reveals demand

• Professionals look to buy undervalued opportunities

(Discounts), and sell overvalued opportunities (Premiums)
DISCOUNTS & PREMIUMS
Traders become consistently profitable when they limit their trading to
only buying discounts and only selling premiums.

DISCOUNTS PREMIUMS
Any deduction from the nominal value Any sum above the nominal value
1. Cheaper than fair value 1. More expensive than fair value
2. Excess supply; decreased demand 2. Low supply; increased demand
3. The goal is to always buy below fair 3. The goal is to always sell above fair
market value market value
4. Always buying below value 4. Always selling above value
(Discount) offers the quickest path (Premium) offers the quickest path
to consistent profitability to consistent profitability
5. Buy Discounts during Markups 5. Short Premiums during Markdowns
6. Cover short positions at Discounts 6. Liquidate long positions at Premiums
during Markdowns during Markups
5 SIMPLE VALUE RULES
The 5 Simple Value Rules help to train your mind to only trade during
periods that offer the best odds for success.

5 SIMPLE VALUE RULES

1. Buy when price is undervalued (Discount)

2. Sell when price is overvalued (Premium)

3. Buy when prices are trending up (Markup)

4. Sell when prices are trending down (Markdown)

5. Avoid trading during periods of Accumulation or Distribution

IDENTIFYING VALUE
OPPORTUNITIES
IDENTIFYING VALUE
OPPORTUNITIES
The ability to quickly and accurately identify value opportunities
will set you apart as a trader.

• Identifying value opportunities is both

easy and difficult

• Once you master a few simple

concepts, you’ll be able to easily
identify value in any chart

• When you’re able to identify discounts

and premiums, limit your trading to
only these opportunities
TOOLS OF THE TRADE
Identifying value opportunities can be quite easy, especially
when using the right tools in the right way.

PEMA PIVOT RANGE VWAP

Pivot-Based Exponential The Pivot Range reveals a Volume-Weighted Average
Moving Averages visually value area each month, Price is a classic indicator
reveal value opportunities which is used to identify that clearly reveals a real-
during trending markets value opportunities time value line
1. Simple; accessible 1. Simple, accessible 1. Simple, semi-accessible
2. Multiple moving 2. Pivot range trend and 2. VWAP offers a real-time
averages easily identify width analysis can help view of value, and over/
the trend, and its value identify great value and undervalued price levels
opportunities breakout opportunities are easily identified
3. “Stacked & sloped” 3. “Buy dips, and sell rips” 3. “Buy dips, and sell rips”
offers the best way to at the pivot range at VWAP during a
use this method during trending markets trending market
IDENTIFYING VALUE

Your goal is to identify either:

1. Periods of Accumulation that are
ready to transition to a Markup phase
2. An already established Markup phase

...and then use the tools of the trade to

identify the best action zones

Markup
Accumulation
TOOLS OF THE TRADE

During the Markup phase, every pull- Premium

back to the 1st and 2nd levels of the
PEMAs offers great value opportunities

Discount
Accumulation
MAs are stacked & sloped,
meaning they are all
trending higher in unison
TOOLS OF THE TRADE

During the Markup phase, every test at

the Pivot Range is the market testing
prior value; if buyers defend value, then
another wave of strength occurs

Accumulation
Price finds support at the
Pivot Range during a
trending market
TOOLS OF THE TRADE

During the Markup phase, price will

“test” VWAP to reaffirm direction, which
usually welcomes responsive buyers that
are eager to buy at a discount

Accumulation
Pull-backs to VWAP during
a strong Markup phase offer
great value opportunities
 PIVOT-BASED
MOVING AVERAGES
PEMA
Pivot-Based Exponential Moving Averages (PEMA) provide an easy
method for identifying value opportunities during trending markets.

PEMA Buy and Sell pull-backs only within

established Markup or Markdown phases
Pivot-Based Exponential
Moving Averages visually Sell Premiums
reveal value opportunities
during trending markets
1. Simple; accessible
2. Multiple moving
averages easily identify
the trend, and its value Buy Discounts
opportunities
3. “Stacked & sloped”
offers the best way to MAs should always be
use this method 13/34/55 “stacked & sloped”
GETTING STARTED
Pivot-Based Exponential Moving Averages (PEMA) use the pivot point
(or typical price) as the input, rather than the standard Close price.
However, you can use any style or combination of inputs and moving
averages to execute the same approach.

THE INPUT: MOVING TREND

PIVOT POINT AVERAGES INTENSITY
The Pivot Point: Choose your preferred style Adjust the moving averages
(H + L + C) / 3 of moving average to the intensity of the trend
1. Pivot-based EMA 1. Exponential: faster 1. High: 8/13/21
2. Standard Close 2. Simple: classic 2. Med: 13/21/34
3. Low: 13/34/55
PEMA ANALYSIS

Sell Premiums

Adverse Close

Buy Discounts
PEMA ANALYSIS

Value opportunities always exist Buying Climax

during a Markup phase when the
PEMAs are “stacked & sloped”

Distribution

Buying discounts on the

way up will continue to work
until a buying climax says the
Stacked & Sloped party is over
PEMA ANALYSIS

Buying the first pull-back after a

breakout from an Accumulation
phase can be tricky...and profitable!

“S & S”
Retest; 1st Buy
Initial Crossover
PEMA ANALYSIS

Each Markup phase has its own

personality; tailor your approach
to the personality

Adverse close
is bearish

You’ll want to adjust the

PEMAs depending on the
Stacked & Sloped intensity of the trend
PEMA ANALYSIS

Too much
Symmetry and structure distance
should always be noted

Never attempt to buy

a discount after a
Lazy slope “parabolic” advance
PEMA ANALYSIS

The party is over when price

fails to make a new low
Sell Premiums

Buy (Cover)
Discounts

Fails to make new low

PIVOT RANGE
ANALYSIS
PIVOT RANGE ANALYSIS
The Pivot Range is a multi-faceted indicator that reveals value areas in
any chart and timeframe, making it easy to identify great bargains.

PIVOT RANGE Buy and Sell pull-backs only within

established Markup or Markdown phases
The Pivot Range reveals a
value area each month, Sell Premiums
which is used to identify
value opportunities
1. Simple, accessible
2. Pivot range trend and
width analysis can help PR Buy Discounts
identify great value and
breakout opportunities Higher and Lower Value
3. “Buy dips, and sell rips” PR relationships make for
at the pivot range the best opportunities
during trending markets
GETTING STARTED
The Pivot Range is a simple indicator that can be easily calculated with
a spreadsheet, but is not a commonly included indicator for most
trading platforms. However, many traders have already written the code
for this indicator for the most popular platforms.

The PIVOT TYPES OF PIVOT-BASED

RANGE CALCULATIONS ANALYSIS
The monthly Pivot Range The Pivot Range is flexible The Pivot Range can be
uses the prior month’s and can be calculated for used in many types of
H/L/C as inputs many timeframes analytical ways
1. Pivot: (H + L + C) / 3 1. Daily 1. Trend Analysis
2. BC: (H + L) / 2 2. Weekly 2. Width Analysis
3. TC: P + (P - BC) 3. Monthly 3. Relationships
4. Yearly
PIVOT RANGE ANALYSIS

The Pivot Range helps to keep you

disciplined to the trend

Trend Integrity
PIVOT RANGE ANALYSIS

After a breakout from an

Accumulation phase, you’ll want
to buy Discounts at the Pivot
Range during the Markup phase

Buy Discounts
Price tends to remain above
the Pivot Range during highly
bullish Markup phases
PIVOT RANGE ANALYSIS

An adverse close against the

Pivot Range ends the Markdown
Sell Premiums

Each test at the Pivot Range is

the market “retesting” value to
reaffirm directional conviction
PIVOT RANGE ANALYSIS

Inside Value

Sell Premiums

The first pull-back to the Pivot Range after a

breakout from a Distribution phase can be
the first of many during a Markdown phase
PIVOT RANGE ANALYSIS

A well-behaved stock can offer

a seamless transition between
market phases, and the
Pivot Range can light the path

Markdown

Markup

Accumulation
PIVOT RANGE ANALYSIS

Any pull-back, regardless of if

it’s at the Pivot Range, can be a
value buy as long as price
remains above the Pivot Range

Trend Integrity
VOLUME-WEIGHTED
AVERAGE PRICE
VWAP
Volume-Weighted Average Price is a powerful indicator that illustrates
where the average trader bought and sold, thus revealing fair value.

VWAP Buy and Sell pull-backs only within

established Markup or Markdown phases
Volume-Weighted Average
Price is a classic indicator Sell Premiums
that clearly reveals a real-
time value line
1. Simple, semi-accessible
2. VWAP offers a real-time
view of value, and over/
Buy Discounts
undervalued price levels
are easily identified
3. “Buy dips, and sell rips” VWAP should always
at VWAP during a trend higher below price,
VWAP
trending market or lower above price
GETTING STARTED
Volume-Weighted Average Price (VWAP) is a powerful indicator that
many high-level professionals use daily. This indicator is oftentimes a
standard indicator for many trading platforms, but the ability to
customize the indicator is not yet standardized and is less common.

VWAP TIMEFRAME VWAP

CALCULATION FLEXIBILITY ANALYSIS
Calculates the ratio of the The best VWAP indicators VWAP can be used in a
value traded to the total allow for customization of variety of ways, but
volume traded the period calculated identifying value is tops
1. Daily 1. BULL: Buy at or Below
2. Weekly 2. BEAR: Sell at or Above
3. Monthly 3. NEUTRAL: Sell Above;
4. Quarterly Buy Below
THE VWAP MATRIX
The VWAP Matrix illustrates the most common “thought process” used
by professionals when determining trade ideas using VWAP.
Following the standard “Rules” of the VWAP
VWAP MATRIX Matrix generally leads to profitable trading.

The VWAP Matrix

“Calls to Action” & Results
1. Action: Buy Below
Result: Profitable Trade
2. Action: Sell Above
Result: Profitable Trade
3. Action: Buy Above
Result: Aggressive Buying
4. Action: Sell Below
Result: Aggressive Selling
VWAP ANALYSIS

VWAP displays fair value, which is Premium

set by the market through actual
transactions. Value opportunities
exist above and below VWAP

Premium
Discount

Discount
VWAP ANALYSIS

Premium

Premium

Discount
Discount

VWAP represents fair value, regardless of the

trend; buy at/below it, and sell at/above it
VWAP ANALYSIS

Premium
Whether you participated in the prior
move is irrelevant; the pull-back to VWAP
after the rally is its own opportunity

Discount
VWAP ANALYSIS

Premiums

Discounts

Discounts and Premiums become

easy to spot during a well-behaved
Markup (or Markdown) phase
VWAP ANALYSIS

Premiums

By definition, Discounts and

Premiums are above and below
value, however, any pull-back to
value from a recent high/low can Discounts
also fall within these categories
VWAP ANALYSIS

Just remember, if you have an

established Markup phase in a
well-behaved instrument, the Premium
market is likely to follow the
rules of Auction Market Theory

Discount
MOVING FORWARD
At its core, profitable trading is all about understanding market
structure and value. The rest is technique and discipline.

• The Four Market Phases help you

understand market structure

• Seek out phases of Accumulation and

Distribution in order to trade during
the subsequent Markups/Markdowns

• The concepts of Value, Discounts, and

Premiums tell you when to buy & sell

• Limit your trading to opportunities

that offer a path of least resistance
 SWING TRADE PRO
FOUNDATIONAL SWING TRADING CONCEPTS
with Frank Ochoa