SWING TRADE PRO

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
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.
• Gives traders a “heads-up” on the
FOUR MARKET 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
Any deduction from the nominal value
1. Cheaper than fair value
2. Excess supply; decreased demand
3. The goal is to always buy below fair
market value
4. Always buying below value
(Discount) offers the quickest path
to consistent profitability
5. Buy Discounts during Markups
6. Cover short positions at Discounts
during Markdowns
PREMIUMS
Any sum above the nominal value
1. More expensive than fair value
2. Low supply; increased demand
3. The goal is to always sell above fair
market value
4. Always selling above value
(Premium) offers the quickest path
to consistent profitability
5. Short Premiums during Markdowns
6. Liquidate long positions at Premiums
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
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
IMPORTANCE OF
TRADE LOCATION
THE MARKET IS A MARKET!
While traders often call it “The Market”, many fail to realize that it is
indeed a market. Trading is a game of inches, and every tick counts.
• We’ve become accustomed to
paying “fixed” prices for our goods

• However, the Stock Market is a real

market, without fixed pricing

• Just as you would negotiate price at

a farmer’s market or artisan market,
you should negotiate your pricing in
the Stock Market, as well

• Every tick saved adds up over time,

thereby increasing your profitability
IT’S AN AUCTION!
Negotiate your trade like you’re bidding at an auction. Be picky, bid low
and always try to get the best price possible.

• Novice traders routinely enter a trade and watch price go

immediately against them

• Instead, let price “go against you” before you enter the trade

• Never rush to enter a trade; sitting on your hands is an option

• Bid low, and patiently allow price to come to you

• Pro traders bid low, and aren’t always filled

• But when they are filled, they’re typically great entries

ALL ABOUT LOCATION!
The secret to making more money out of each trade is...
TRADE LOCATION! Make money on the “front end” of the trade.
• Better entries (Trade Location)
means more profit potential

• Better entries means less risk

• Less risk means smaller losses

• Negotiating your entry (with Limit

Orders) eliminates slippage

• Defining your trade location

requires discipline; discipline leads
to profitable trading
NEGOTIATE THE ENTRY

A bullish Outside Day setup develops;

rather than enter at the open of the
next session, place a buy Limit at the
LMT
midpoint of the candle ($32.70)

H: 33.12
L: 32.28
M: 32.70
EXECUTION

Novice
traders
Next day’s Open is $33.19, while our
fill here
entry is $32.70. Made 49 ticks on the
“front end” of the trade (+1.5%)

LMT

Pro traders filled

here: $32.70; 9 ticks
from the low
NEGOTIATE THE ENTRY

Bullish gap from an Accumulation phase;

rather than enter upon a break of the recent LMT
high, place a buy Limit at the midpoint of the
candle ($19.30)

H: 19.50
L: 19.10
M: 19.30
EXECUTION

Instead of entering upon a new high,

we filled at $19.30. Gained 20 ticks
on the trade’s “front end” (+1.0%) Most traders
fill here

LMT

Limit Filled: $19.30;

2 ticks from the low
PRO-STYLE ENTRY
TECHNIQUES
PRO-STYLE ENTRY
TECHNIQUES
Pro-Style entry techniques provide a solid approach to consistently
triggering great entries in any timeframe.

• They force you to be disciplined

• They help create more profit

potential; make money on “front end”

• They reduce slippage and risk

• They provide reliable ways to trigger

entries in any timeframe and any type
of setup or opportunity
PRO-STYLE ENTRY
TECHNIQUES
AMBUSH
ENTRY
Placing a Limit Order at a
level where price has yet to
trade
1. High risk factor
2. Triggers upon a Reversal
3. Must have high
confidence factor to use
this entry
4. Best used at high
confluence zones, or
established supp/resis
RETEST
ENTRY
Placing a Limit Order at a
level where price recently
traded
1. Med risk factor
2. Triggers upon a Reversal
3. Forces you to practice
discipline and patience
4. Set Limit order toward
the center of the prior
candlestick or wick
5. PivotBoss Preferred
THRESHOLD
ENTRY
Placing a Stop Market
order beyond a recent high
or low
1. Lower risk factor
2. Triggers upon a
Breakout
3. Forces you to practice
discipline and patience
4. Set SM order beyond a
recent high/low, or
beyond supp/resis
THE AMBUSH ENTRY
Pros deploy the Ambush Entry by placing a Limit Order at a level where
price has yet to trade, in anticipation of a reversal.
AMBUSH
ENTRY
Placing a Limit Order at a
level where price has yet to
trade
1. High risk factor
2. Triggers upon a Reversal
3. Must have high
confidence factor to use Set Ambush Limit to buy
this entry at an area of established
4. Best used at high support or confluence
confluence zones, or prior to a price test
established supp/resis
AMBUSH EXAMPLE

Clearly marked areas of support

and resistance make for great
areas to place Ambush Limit orders

LMT
AMBUSH EXAMPLE

LMT

Well-defined support or
resistance levels work best
AMBUSH EXAMPLE

Use the Ambush sparingly;

only use it at an area
of clear significance

LMT

LMT
THE RETEST ENTRY
Pros deploy the Retest Entry by placing a Limit Order at a level where
price has recently traded, in an effort to attain better trade location.
RETEST
ENTRY
Placing a Limit Order at a
level where price recently
traded
1. Med risk factor
2. Triggers upon a Reversal
3. Forces you to practice
discipline and patience
Let price test an area of established
4. Set Limit order toward
support or confluence, then place a
the center of the prior
buy Limit order toward the center of
candlestick or wick
the “testing” candlestick or wick
5. PivotBoss Preferred
RETEST EXAMPLE

LMT

Let the signal bar fully develop;

then set retest Buy Limit at the
center of the signal bar
RETEST EXAMPLE

There’s no magic formula or secret recipe;

the point is to always try to attain better
trade location, even if it’s by a few ticks

LMT

You can also set the retest Buy Limit

at the midway point of the prior wick
THE THRESHOLD ENTRY
Pros deploy the Threshold Entry by placing a Stop Market Order just
beyond a prior high or low, in order to capture a breakout entry.
THRESHOLD
ENTRY
Placing a Stop Market
order beyond a recent high
or low
1. Lower risk factor
2. Triggers upon a
Breakout
3. Forces you to practice
discipline and patience Place a Stop Market buy order
4. Set SM order beyond a a few ticks past the recent high or low
recent high/low, or
beyond supp/resis
THRESHOLD EXAMPLE

Threshold entry allows for a more

“confirmed” entry, while allowing
you to control your price

SM

This is a solid entry approach

that I usually deploy if I’ve missed
a better entry via a failed Ambush
or Retest entry attempt
THRESHOLD EXAMPLE

SM

In addition to breakout entries, the

Threshold can also be used for
“confirmed” reversal entries
INTRADAY ENTRY
TECHNIQUES
Intraday entry techniques provide a systematic approach to entering
trades, regardless of which timeframe the setup originates.
• Allow for additional confirmation;
provide one last “step” before entry

• Can be used when an opportunity

exists, but direction remains unknown

• Provide a structured approach to

entering trades; consistency

• Can also be used as intraday

“setups”; setup within a setup
INTRADAY ENTRY
TECHNIQUES
Opening Range Opening Range
BREAKOUT Reversal
Placing a Stop Market
Order beyond the 30-min
OR high (buy) or low (sell)
1. Lower risk factor
2. Triggers upon a
Breakout
3. Regarded as “safe”;
confirmed entry
4. 30-min Opening Range
is standard, but 15-min
and 60-min also used
Value Area
Reversal
Placing a Limit Order at Placing a Limit Order order
the 30-min OR low (to within the Value Area for a
buy) or high (to sell) reversal entry
1. Med risk factor 1. Med risk factor
2. Triggers upon a Reversal 2. Triggers upon a Reversal
3. Trickier entry, but 3. Trickier entry, but helps
creates more profit create more profit
potential potential
4. 30-min Opening Range 4. Must be Higher/Lower
is standard, but 15-min Value relationship;
and 60-min also used triggers inside the range
OR BREAKOUT ENTRY
Pros use the OR Breakout entry to time intraday entries for higher
timeframe trading opportunities.
Opening Range
BREAKOUT Set a Stop Market order to
buy just beyond the 30-min
Placing a Stop Market Opening Range high
Order beyond the 30-min
OR high (buy) or low (sell)
1. Lower risk factor
2. Triggers upon a 30-min
Breakout OR
3. Regarded as “safe”;
confirmed entry
4. 30-min Opening Range
is standard, but 15-min
and 60-min also used
OR BREAKOUT EXAMPLE

Once you’ve found a higher

timeframe setup that you’re ready
to trade, drop down to an intraday
timeframe for an entry...

Inside Day
OR BREAKOUT EXAMPLE

Once the 30-min Opening Range

has developed, use a Threshold
entry to trigger a Long position
upon a crossing of the 30-min High
SM

30-min OR

Inside Day
OR BREAKOUT EXAMPLE

Another setup looks enticing,

but direction remains up in the air;
jump into an intraday timeframe for entry

Inside Day
OR BREAKOUT EXAMPLE

Inside Day The 30-min OR helps

confirm directional
conviction and allows
for a confirmed entry

*Caution: avoid this SM

entry if the 30-min
OR is too wide
OR BREAKOUT ENTRIES

1. Use a Stop Market order

Can use a Retest after 2. Require close below OR
a close below OR

Retest
SM
Can place an Ambush
Limit back at OR low
Can require
a close below OR

3. Require close below OR, then use a Retest entry (Preferred)

4. Use Ambush at OR low after confirmed break (Preferred)
OR REVERSAL ENTRY
Pros use the OR Reversal entry to time intraday entries for higher
timeframe trading opportunities, which offers better trade location.
Opening Range
Reversal
Placing a Limit Order at
the 30-min OR low (to
buy) or high (to sell) 30-min
OR
1. Med risk factor
2. Triggers upon a Reversal
3. Trickier entry, but
creates more profit
potential
Set a Limit order to buy
4. 30-min Opening Range
upon a reversal of the
is standard, but 15-min
30-min Opening Range low
and 60-min also used
OR REVERSAL EXAMPLE

Price gaps up and begins a potential

transition from Accumulation phase
to Markup phase; drop to lower
timeframe for entry

Gap Play
OR REVERSAL EXAMPLE

The OR Reversal can be

difficult to trigger, and
often requires patience
and quick thinking, as you LMT
never know if an OR Gap
Reversal opp will occur. Enter upon a reversal
Integrity from the 30-min low

Only use the OR Reversal

entry when there is solid
directional conviction
OR REVERSAL ENTRIES

Couple any of the 3 Pro-Style entry

techniques with the OR Reversal

Threshold
Retest
Ambush
VA REVERSAL ENTRY
Pros use the VA Reversal entry to time intraday entries for higher
timeframe trading opportunities, which offers better trade location.
Value Area Pivot Range must be completely higher,
and prior day’s close and current day’s open
Reversal must be above current day’s Pivot Range
Placing a Limit Order order
within the Value Area for a
reversal entry
1. Med risk factor
2. Triggers upon a Reversal
3. Trickier entry, but helps
create more profit
potential
4. Must be Higher/Lower Allow price to test the
Value relationship; day’s Value Area, then use
triggers inside the range a Retest entry trigger
VA REVERSAL RULES

Ideal Rules for Entry:

1. Current pivot range is
completely above prior day’s
2. Prior day’s close is above
next day’s pivot range 3
3. Current day’s open is
above the pivot range 2 4
4. Use any Pro-style entry

1
VALUE AREA REVERSAL
STRUCTURE
The goal is to enter anywhere
within the value area during a
retest of the prior day’s range

Buy the Dips

The shaded areas show

when the market is
retesting the prior day’s
price range before new
price discovery occurs
VALUE AREA REVERSAL
STRUCTURE
Visualize the intraday movement
within a daily bar structure

Your goal is to buy

within the “wick” of the
upcoming day
VA REVERSAL EXAMPLE

Daily Bar overlay

Intraday
Inside Value
setup

Get great trade location

by triggering entries
within the pivot range
VA REVERSAL EXAMPLE

After direction is confirmed,

use a VA Reversal entry to get *
great trade location

Inside Day
w/breakout

* The goal is to enter Short upon

the wick of the upcoming candlestick
VA REVERSAL EXAMPLE

The goal is to enter anywhere

within the value area
Lower Value

The Pivot Range visually represents value in the

chart; triggering within this zone offers great
trade location during a trending market
SWING TRADING SETUPS
SWING TRADING SETUPS

INDICATOR- CANDLESTICK RANGE-BASED

BASED SETUPS SETUPS SETUPS
Indicator-based setups that Two-day price patterns Price-based setups that
help identify pull-back and that help identify short- identify range expansion
breakout opportunities term trading opportunities and contraction
1. PEMA Pull-Back 1. Inside Day 1. N-Bar Narrow Range
2. VWAP Pull-Back 2. Outside Day 2. N-Bar Wide Range
3. Inside Value 3. Open Gap Play
4. Higher/Lower Value
INDICATOR-BASED SETUPS
INDICATOR-BASED SETUPS
These Indicator-Based setups are designed to keep you disciplined to
the trend, while remaining focused on value opportunities.
PEMA INSIDE
PULL-BACK VALUE
Finds value opportunities Finds markets ready to
during the Markup and break out from periods of
Markdown phases Accumulation/Distribution

VWAP HIGHER/Lower
PULL-BACK VALUE
Finds value opportunities Finds value opportunities
during the Markup and during the Markup and
Markdown phases Markdown phases
PEMA PULL-BACK
The PEMA Pull-Back setup is used to identify value opportunities during
trending markets using pivot-based moving averages.
Buy and Sell pull-backs only within
PEMA established Markup or Markdown phases
PULL-BACK L: 13/34/55
M: 13/21/34
Finds value opportunities H: 8/13/21
during the Markup and
Markdown phases
1. Value opportunity setup
2. Trend-confirmed setup ne
3. Only trade when moving r Zo
e
averages are “stacked Tr igg
13
and sloped” Can use all entry types:
4. Trade during Markup 34 OR Breakout, OR/VA Reversal,
and Markdown phases 55 Ambush, Retest, or Threshold
PEMA PB EXAMPLE

The “safest” way to get great trade location

is to allow price to test your trigger zone
before placing an entry; a successful test is
the “all clear” to negotiate your entry

LMT

Place a Retest entry at

the center of this wick
PEMA PB EXAMPLE

A reversal candlestick
that forms after a test
indicates the market will
likely defend that level

LMT

Place a Retest entry at

the center of this wick
PEMA PB EXAMPLE

A big test and reversal in

the trigger zone gives you
a great reference point for
a Retest entry

LMT
LMT

The center of this wick provides

a great area for a Retest entry
PEMA PB EXAMPLE

Even if you miss a

“perfect” entry, you
can still participate
in the move using a
Pro-style entry

Start with an aggressive Ambush or Retest

entry location...force the market to fill you;
even if you are not filled, you can always move
your entry lower or use a Threshold entry
VWAP PULL-BACK
The VWAP Pull-Back setup is used to identify value opportunities during
trending markets using Volume-Weighted Average Price.
Buy and Sell pull-backs only within
VWAP established Markup or Markdown phases

PULL-BACK
Finds value opportunities
during the Markup and
Markdown phases
o ne
r Z
1. Value opportunity setup i g g e
2. Trend-confirmed setup Tr
3. Only trade when VWAP
is moving higher/lower
Use the Retest or Ambush
4. Trade during Markup
VWAP entry techniques as close to
and Markdown phases
VWAP as possible (or lower)
VWAP PB EXAMPLE

A healthy advance usually precedes a

pull-back opportunity; this allows traders
that missed the train to join the ride LMT

Enter on the 3rd

bar after the gap
by placing a
Retest entry at
the center of the
prior candlestick.
VWAP PB EXAMPLE

You don’t have to be a hero placing

Ambush entries; instead, allow price
to test your trigger level, then place
an entry using the “test” info

LMT

Best case scenario: a reversal

candlestick forms after testing
VWAP; place your Retest entry at
the center of the wick
VWAP PB EXAMPLE

Another reversal candlestick

develops at VWAP, giving us
another opportunity at great
trade location
LMT

Place your Retest

entry at the center
of this wick; move
Retest Limit higher if
you are not filled
VWAP PB EXAMPLE
Place an Ambush entry here; or place a
Retest entry at the center of the candle
to be filled the next day
LMT
SM

You must very VERY confident when using

Ambush entries; they must be used during
established trends or at areas of significant
support/resistance or confluence
VWAP PB EXAMPLE

A bullish reversal candlestick

at VWAP during a Markup
phase can offer great rewards

LMT

Allow the first candle

to fully develop, then
place a Retest entry at
the center of the wick
for the following day
INSIDE VALUE
The Inside Value setup is the most explosive value area relationship, as
it identifies markets ready to break out from periods of Accum/Dist.
Inside Value must occur as a result of Accum or
INSIDE Distribution; and breakout should occur swiftly
or via a breakaway gap
VALUE
Identifies potential
breakouts from periods of
Accumulation/Distribution VA is
narrow
1. Momentum setup
2. Develops due to Range
Contraction
3. Only trade when price
has broken out of a Can use all entry types:
phase of Accumulation/ OR Breakout, OR/VA Reversal,
Distribution Ambush, Retest, or Threshold
INSIDE VALUE EXAMPLE

Ideally, you’ll want a gap to

spark the breakout from an
Inside Value setup

LMT
Use an OR entry on the day
of the gap, or use a Retest
entry the next day
INSIDE VALUE EXAMPLE

Not a very bullish candle after the

gap, so use the Threshold entry for
a more “confirmed” entry

SM
INSIDE VALUE EXAMPLE

The best Inside Value setups occur as a

result of compression/contraction; then
look for a breakout from the range

SM

Inside Day breakout; use OR

B/R or a Threshold entry
HIGHER/LOWER VALUE
The Higher and Lower Value setups help identify value opportunities
during the Markup and Markdown phases.

HIGHER/Lower Pivot Range must be completely higher,

and prior month’s close and current month’s
VALUE open must be above current month’s Pivot Range

Finds value opportunities

during the Markup and
Markdown phases
1. Value opportunity setup
2. Trend confirmed setup
3. Current PR must be
completely higher or Allow price to test the
lower than prior month’s Value Area, then use a
4. Trade during Markup Retest entry trigger or
and Markdown phases intraday entry technique
HIGHER VALUE EXAMPLE

Ideal Rules for Entry:

1. Current PR is completely above prior PR
2. Prior month’s C is above next month’s PR
3. Current month’s Open is above the PR
4. Use any Pro-style entry
3

2
LMT
1
4 Use a Retest entry after the “test” bar
HIGHER VALUE ENTRIES

There are many ways to enter a trade; use the

entry that provides the best trade location and
makes the most sense for the scenario

SM

OR B/R
SM

SM
LMT
LOWER VALUE EXAMPLE

LMT

LMT

Always try to get the best trade

location, even if it costs you an entry
CANDLESTICK SETUPS
CANDLESTICK SETUPS
Candlestick Setups are simple and effective at helping you identify
potential opportunities, but must be used at the appropriate times.

INSIDE DAY OUTSIDE DAY GAP PLAY

Signals a potential Signals a potential
breakout opportunity reversal opportunity
1. Breakout setup 1. Reversal setup
2. 2-bar pattern; develops 2. 2-bar pattern; develops
when current price when current price
range is inside prior range engulfs prior day’s
day’s price range price range
3. Breakouts from this 3. Pattern signals a major
pattern can signal big reversal opportunity,
momentum moves of 3 especially when coupled
to 5 days with a big price range
and increased volume
Signals a potential
breakout opportunity
1. Breakout setup
2. Develops best when
gaps occur outside prior
price range/compression
3. Pattern signals a major
breakout opportunity,
especially when coupled
with increased volume
and when price
maintains gap integrity
INSIDE DAY SETUP
The Inside Day setup develops when the current day’s price range falls
within the price range of the prior day, which can lead to big breakouts.

INSIDE DAY The Inside Day candlestick pattern works

best if the setup forms during a Markup
Signals a potential or Markdown phase; not within congestion
breakout opportunity
1. Breakout setup
2. 2-bar pattern; develops
when current price
range is inside prior
day’s price range
3. Breakouts from this
pattern can signal big
Set a Stop Market order
momentum moves of 3
to buy just above the one
to 5 days
or two day high
INSIDE DAY W/PEMA PB

Candlestick setups should be paired with

another established technical pattern or
setup; this Inside Day developed at the
Trigger Zone of the PEMAs
Use OR Entry
due to gap
INSIDE DAY OR ENTRY

An Inside Day setup can trigger an

explosive breakout; using an OR Entry
is usually the best approach
SM LMT
INSIDE DAY EXAMPLE

Due to swift breakouts that Inside Day

setups can cause, you must be ready
with a Threshold or OR entry

SM

Since price
opened inside the
setup’s range, use
a Threshold entry
INSIDE DAY EXAMPLE

Where a setup develops can tell a lot

about its potential success rate.

Within a congestion is
not the best placement
for the setup

Better
placement
OUTSIDE DAY SETUP
The Outside Day setup develops when the current day’s price range
engulfs the prior day’s price range, which signals an impending reversal.
The Outside Day candlestick must
OUTSIDE DAY have a lower low than the prior day
and must close above the prior day high
Signals a potential
reversal opportunity
1. Reversal setup
2. 2-bar pattern; develops
when current price
range engulfs prior day’s
price range
3. Pattern signals a major
reversal opportunity,
especially when coupled
with a big price range Use the Threshold
and increased volume or Retest entry techniques
OUTSIDE DAY EXAMPLE

Candlestick At resistance;
setups are all not as good
about context
and placement

At support; good
OUTSIDE DAY EXAMPLE

Pairing this setup with another established

technical pattern is a good idea; this Outside Day
developed at the Trigger Zone of the PEMAs

Use OR Entry
due to gap
OUTSIDE DAY EXAMPLE

Outside Day forms at PR

during Markdown phase

Use OR or
Value entry
THE GAP PLAY
The Gap Play looks to profit from momentum opportunities that occur
when price gaps out of a phase of Accumulation or Distribution.

GAP PLAY Can use all entry types:

OR Breakout, OR/VA Reversal,
Signals a potential Ambush, Retest, or Threshold
breakout opportunity
1. Breakout setup
2. Develops best when
gaps occur outside prior Accum
price range/compression or Distr
3. Pattern signals a major
breakout opportunity,
especially when coupled
with increased volume
Gap should occur out of a phase of compression,
and when price
and must maintain gap integrity
maintains gap integrity
GAP PLAY EXAMPLE

Preferably, you want your Gap Plays

to break out from a period of
Accumulation or Distribution

LMT

A full-bodied candlestick
after the gap is one of the
best case scenarios
GAP PLAY BULL
ENTRY SCENARIOS
SM BEST ENTRY
LMT LMT SCENARIOS

WORST ENTRY
SCENARIOS
GAP PLAY EXAMPLE

Another best case scenario is for

the open of the gap to be outside
the prior price range

LMT
An open
outside the
Accum phase
is very bullish
GAP PLAY EXAMPLE

If price gaps beyond your Retest or

Threshold entries, or if you want to
enter on the gap bar, use an OR entry

An OR breakout
or reversal entry
can be used
GAP PLAY EXAMPLE

Potential OR
Breakout entry

LMT LMT

Potential OR
15-min bar Reversal entry
opening entries

Getting in on the first day of the

gap can be rewarding, but you
must choose between an OR
entry or a 15-min Retest
GAP PLAY EXAMPLE

A breakout from a clearly established

Accumulation phase can trigger
months of Markup movement

This entry can net you swing

profits, and also become a
longer term winner
RANGE-BASED SETUPS
RANGE-BASED SETUPS
Range-Based setups provide a price-based method for determining
when to expect range expansion or contraction in the days ahead.

RANGE CONTRACTION RANGE EXPANSION

EXPECTED EXPECTED
1. 3-Bar Wide Range 1. 3-Bar Narrow Range
3BWR (10) 3BNR (10)
3BWR (20) 3BNR (20)
2. 5-Bar Wide Range 2. 5-Bar Narrow Range
5BWR (10) 5BNR (10)
5BWR (20) 5BNR (20)
N-BAR WIDE RANGE
The N-BWR pattern develops when the current n-day range is the
widest of the last x-periods, which tends to lead to range contraction.

N-BWR The N-Bar Wide Range setup helps identify

periods when the upcoming price range may
Signals potential range yield a drastically smaller range than average
contraction ahead
1. Predicts contraction
2. Traditionally a 3- or 5-
bar pattern
3. The pattern develops
when the current n-bar
range is the widest of
the last 10 or 20
periods
4. Can forecast a huge
reduction in price range Best used for price forecasting
N-BAR WIDE RANGE
The N-Bar Wide Range price pattern develops when the current n-day
range is the widest of the last 10 or 20 periods, which generally leads
to a phase of range contraction.

• Toby Crabel price pattern 3DR 1: 45.00

3DR 2: 45.00
• Unusually wide range 3DR 3: 30.75 This 3BWR10
leads to price contraction 3DR 4: 35.00 helped forecast
range contraction of
3DR 5: 42.25
50% over the next 3
• Up to 40% decrease in 3DR 6: 32.50 days in the E-Mini
price range during the 3DR 7: 29.75 S&P 500 (a drop of
test period 3DR 8: 39.50 25.25 points).
3DR 9: 38.00
• Success rate of up to 78%
3DR 10: 50.75
3-BWR

High range MDRs lead to low range

MDRs. Either avoid trading, or trade with
vastly closer targets.

3BWR10
(50.75) Result:
25.25 (-50%)
5-BWR

A 5BWR signal is the “heads

up” to avoid trading in the
upcoming period

Result

5BWR10
N-BAR NARROW RANGE
The N-BNR pattern develops when the current n-day range is the
most narrow of the last x-periods, which can lead to range expansion.

N-BNR The N-Bar Narrow Range setup

Signals potential range helps identify when price may be
expansion ahead ready to see range expansion
1. Predicts breakouts
2. Traditionally a 3- or 5-
bar pattern
3. The pattern develops
when the current n-bar
range is the most
narrow of the last 10 or
20 periods
4. Can forecast huge price Usually a breakout signal;
swings compared to use an OR Breakout/Reversal entry
average
N-BAR NARROW RANGE
The N-Bar Narrow Range price pattern is identified when the current
n-day range is the smallest of the last 10 or 20 days.

• Toby Crabel price pattern 3DR 1: 37.75

3DR 2: 30.25
• Unusually narrow range 3DR 3: 46.50 This 3BNR10
leads to price expansion 3DR 4: 50.00 helped forecast
range expansion of
3DR 5: 43.50
• Up to 74% increase in 115% over the next
3DR 6: 39.25 3 days in the E-Mini
price range during test 3DR 7: 39.25 S&P 500 (move of
period
3DR 8: 32.50 60.75 points).
• Success rate up to 92% 3DR 9: 35.75
3DR 10: 28.25
3-BNR

Low range MDRs lead to high

range MDRs. These are the money-
makers; look to participate in the
expanded price activity.

SM

3BNR10 Result:
(25.25) 55.50
(+120%)
5-BNR

Since the N-BNR setup is a

breakout setup, you’ll need to use a
Threshold or OR entry technique

SM

It’s best if this

setup doesn’t
form too often
5-BNR

SM

The setup forms during a Markdown

phase, helping you anticipate the next
wave of weakness/expansion
RANGE-BASED
STATISTICS
E-Mini S&P 500 (5/10/11 - 7/10/12)
Total % Avg. Avg. % %
3DR # Triggers # Hits % Hits
Days Triggers 3DR NR/WR Change Change
3BNR(10) 289 36 12.5% 40.73 26.85 34.1% 33 91.7% 73.7%

3BNR(20) 279 19 6.8% 35.83 22.82 36.3% 17 89.5% 73.3%

3BWR(10) 289 41 14.2% 42.48 57.86 36.2% 30 73.2% 35.5%

3BWR(20) 279 18 6.5% 47.75 69.19 44.9% 14 77.8% 40.5%

Total % Avg. Avg. % %
5DR # Triggers # Hits % Hits
Days Triggers 5DR NR/WR Change Change
5BNR(10) 287 38 13.2% 55.72 41.73 25.1% 27 71.1% 53.1%

5BNR(20) 277 17 6.1% 52.09 36.16 30.6% 15 88.2% 59.7%

5BWR(10) 287 53 18.5% 61.21 77.08 25.9% 40 75.5% 37.3%

5BWR(20) 277 31 11.2% 64.03 82.94 29.5% 20 64.5% 39.0%

FINAL THOUGHTS
Discipline, patience, and technique are the most important aspects
of triggering successful entries.

• It’s all about Trade Location; remain

disciplined in requiring a great entry

• Know the types of Pro-Style entries,

and when to deploy them

• The setup doesn’t make the money;

knowing when to use it does

• Practice leads to confidence;

confidence is gained through
experience
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
TRADE MANAGEMENT
TRADE MANAGEMENT
Trade Management involves every aspect of managing a position, from
targets, trailing stops, loss stops, scaling techniques, and more.

FORECASTING SCALING TRAILING

TARGETS TECHNIQUES TECHNIQUES

THE FREE
ADR PUTTING IT
TRADE
STOPS TECHNIQUE TOGETHER
 FORECASTING
ACCURATE TARGETS
FORECASTING TARGETS
The PivotBoss approach to taking profits relies upon forecasting targets
based on average price movement and utilizing actual profit targets.
• Average price movement provides
a price-based method to
forecasting targets

• Trading to high-probability targets

yields consistent results

• Using profit targets allows you to

more easily incorporate risk
management measures

• Trading to profit targets is the

PivotBoss preferred approach
PRO-STYLE TECHNIQUES
FOR TARGET FORECASTING
ADR SWING
TARGETS
Utilizes multiple-day ranges
to forecast reliable targets
1. Simple; effective
2. Can be used for any
style of trading and in
any timeframe
3. Price-based; self-adjusts
to current volatility
4. Success rates over 70%
ADR WEEKLY
TARGETS
Utilizes weekly price range
to forecast reliable targets
1. Simple; effective
2. Great for swing trading
and range forecasting
3. Price-based; self-adjusts
to current volatility
4. Uses average weekly
ranges for targets
ADR SWING TARGETS
ADR Swing Targets use average price movement and multiple-day
ranges in order to forecast reliable and accurate targets.

ADR SWING ADR SWING TARGETS

TARGETS TGT
Utilizes multiple-day ranges
to forecast reliable targets
1. Simple; effective
+aMDR
2. Can be used for any
style of trading and in
any timeframe
FDL
3. Price-based; self-adjusts
to current volatility
4. Success rates over 70%
WHAT IS THE
ADR METHOD?
The ADR Method is a simple, yet powerful, method used for forecasting
targets using average price range in any timeframe.

• Helps you forecast targets with a

high degree of accuracy (>70%!)

• Auto-adjusts to current market

volatility and behavior

• Simple; effective - and it works!

• The Real-Time and Swing Editions

of The ADR Method teach the
entire methodology
WHY SHOULD YOU
USE ADR TARGETS?
Average Daily Range has been used by professionals for years, because
it provides a price-based approach that relies on current price behavior.

• Provides a simple, price-based approach that incorporates

recent price behavior
• Self-adjusts to current volatility
• Helps provide reasonable price range expectations for the
upcoming period of time
• Allows you to easily forecast bull and bear targets,
regardless of timeframe
• Allows you to anticipate market behavior, including
breakouts (expansion) and range markets (compression)
WHAT IS ADR?
Average Daily Range (ADR) is calculated by averaging the sum
of the daily ranges over a given period of time.

• Daily range refers to the High minus

the Low of the day, including extended
hours trading

• ADR refers to averaging the daily

ranges over a string of days

• The ADR Method primarily uses a 5-

or 10-day calculation, but other
periodicities can be used

• ATR can be a valid substitute for ADR,

but it includes gap data in the value
CALCULATING THE ADR
Numerical Formula: ADR (5)
AVERAGE((H-L), 5) 29.45

Day 1 Day 2 Day 3 Day 4 Day 5 Day 6

44.25 25.75 23.75 27.75 25.75 32.25
MULTIPLE DAY RANGES
A Multiple Day Range (MDR) uses the highest high and the lowest low
over a given number of days to identify the range.

• The highest high minus the lowest low

over a given number of days

• The MDR, and its average, is used to

identify great swing targets

• The ADR Method primarily uses a 3-

and 5-day calculation, but other
periodicities can be used, like a 10-day
MDR PRICE FORECASTING
MDRs help temper your expectations for price movement and
provide a price-based method for forecasting reliable targets.

• Provides reliable price extremes for the

upcoming n-number of days

• Regardless of direction, bull and bear

targets give you great approximations
for your trades

• The Method takes into account

abnormally high/low range MDRs, which
allows you to forecast better targets
CALCULATING THE MDR
The MDR calculation uses a “rolling” method, whereby the oldest day in
the string is dropped when a new day is added.

3DR 1:
1-3
2 3 3DR 2:
2-4
1 4 3DR 3:
3-5
5 7 3DR 4:
66 4-6
3DR 5:
5-7
CALCULATING THE
AVERAGE MDR
Numerical Formula:
AVERAGE((HHV(3)-LLV(3)), 5)
3DR 1 3DR 2 3DR 3 3DR 4 3DR 5 Avg 3DR (5)
=
26.25 37.00 60.75 57.00 45.50 45.30

FORECASTING WITH MDR

The 5-period average 3-day range of 45.30 indicates that the price range of
the upcoming 3 days should be around 45.30...on average.

In the actual example above, the price range of the next 3 days was 46.50.
USING MULTI-DAY
RANGES
The swing edition of the ADR Method uses 3- and 5-day ranges to
forecast targets, but 7- and 10-day ranges should also be used.
• 3- and 5-day ranges help forecast swing
targets 3 and 5 days out

• The Method projects the expected range

over the next 3 (or 5) days according to
recent price behavior

• Can be easily adjusted for longer term

swing trades

• 7- and 10-day ranges should be used for

trade expectancies of up to two weeks
BASE CALCULATIONS
We will utilize two base calculations from the ADR Method for
this course: Normal and Normal Lite.

NORMAL NORMAL LITE

CALCULATION CALCULATION
Projects Avg MDR higher from the FDL, Projects 75% of Avg MDR higher from
and lower from FDH the FDL, and lower from FDH
1. Uses 100% of Avg MDR 1. Uses 75% of Avg MDR
2. BULL: FDL + Avg MDR 2. BULL: FDL + (Avg MDR x .75)
3. BEAR: FDH - Avg MDR 3. BEAR: FDH - (Avg MDR x .75)
4. Accuracy of ~45% 4. Accuracy of ~70%
5. Use as a secondary target 5. Use as the primary target
6. Use 3-, 5-, and 10-day ranges 6. Use 3-, 5-, and 10-day ranges
NORMAL
The Normal calculation projects the average MDR higher from the
First Day Low (FDL), and lower from the First Day High (FDH).

The Normal calculation projects

NORMAL 100% of the Avg MDR

CALCULATION TGT

Projects Avg MDR higher from the

FDL, and lower from FDH
1. Uses 100% of Avg MDR +aMDR
2. BULL: FDL + Avg MDR
3. BEAR: FDH - Avg MDR
4. Accuracy of ~45% FDL
5. Use as a secondary target
6. Use 3-, 5-, and 10-day ranges Great secondary target, and also helps
to forecast future price range
NORMAL APPLIED

Normal Bull: FDL + aMDR

Normal Bull: 32.17 + 1.63
Bull: $33.80

Entry: $32.36
L: $32.17

10-day MDR = 1.63

NORMAL APPLIED

Normal Bull: FDL + aMDR

Normal Bull: 105.28 + 4.38

Bull: $109.96

.58
1 0 5
y: $
n t r
E
5 .28
$1 0
L:
7-day MDR = 4.38
NORMAL LITE
The Normal Lite calculation projects 75% of average MDR higher from
the First Day Low (FDL), and lower from the First Day High (FDH).

The Normal Lite calculation projects

NORMAL LITE 75% of the Avg MDR

CALCULATION
Projects 75% of Avg MDR higher TGT
from the FDL, and lower from FDH
1. Uses 75% of Avg MDR +aMDR
2. BULL: FDL + (Avg MDR x .75) x .75
3. BEAR: FDH - (Avg MDR x .75)
4. Accuracy of ~70% FDL
5. Use as the primary target
6. Use 3-, 5-, and 10-day ranges Great primary target, with a success
rate of over 70%
NORMAL LITE APPLIED

Normal Lite Bull: FDL + (aMDR x .75)

Normal Bull Lite: 32.17 + (1.63 x .75)

NL Bull: $33.39

Entry: $32.36
L: $32.17

10-day MDR = 1.63

NORMAL LITE APPLIED

10-day MDR = 2.90

H: $68.08
E: $67.94

Bear: $65.90

Normal Lite Bear: FDH - (aMDR x .75)

Normal Lite Bear: 68.08 - (2.90 x .75)
ADR WEEKLY TARGETS
ADR Weekly Targets use Average Weekly Range (AWR) in order to
forecast reliable and accurate targets on a week by week basis.

ADR WEEKLY ADR WEEKLY TARGETS

TARGETS
Utilizes weekly price range
to forecast reliable targets
1. Simple; effective
+AWR
2. Great for swing trading
and range forecasting
3. Price-based; self-adjusts
to current volatility WL
4. Uses average weekly
ranges for targets
AVERAGE WEEKLY RANGE
Average Weekly Range (AWR) is calculated exactly like Average
Daily Range, but uses weekly bars instead.

• Weekly range refers to the High minus

the Low of the week

• AWR refers to averaging the weekly

ranges over a string of weeks/months

• A 5- or 10-period calculation works

best, as it includes the most recent
price behavior
AWR FORECASTING
AND TARGETS
Like MDRs, AWR helps temper expectations for price range and
provides a price-based method for forecasting targets for the week.
• Use AWR to forecast potential price
extremes for the upcoming week

• Identifying the potential price range for

a given week helps to manage price
range expectations

• Projecting targets from Monday’s high/

low provides solid targets for the week

• Using a confirmed high or low for the

week helps to pinpoint the best targets
BASE CALCULATIONS
The base calculations for forecasting with Average Weekly Range
are consistent with all other ADR Method calculations.

INITIAL Base TARGET

FORECAST
Projects AWR higher and lower from the
prior week’s closing price
1. Uses 100% of AWR
2. BULL: PWC + AWR
3. BEAR: PWC - AWR
4. Used to determine range
expectations for the next week
5. Average price range suggests that
price should remain within the
projected range during the week
CALCULATIONS
The standard Normal and Normal Lite
base calculations are used for targets
1. Normal [uses 100% of AWR]
• BULL: WL + AWR
• BEAR: WH - AWR
2. Normal Lite [uses 75% of AWR]
• BULL: WL + (AWR x .75)
• BEAR: WH - (AWR x .75)
THE INITIAL FORECAST

Bull: PWC + AWR = 38.04

T: $38.04
Bear: PWC - AWR = 34.04

AWR = 2.00

PWC: $36.04

The Initial Forecast is designed to

give you the estimated price range
for the upcoming week B: $34.04
ADR WEEKLY TARGETS

N Bull: WL + AWR
NL Bull: WL + (AWR x .75) N: $37.86
NL Bear: WH - (AWR x .75)
N Bear: WH - AWR NL: $37.36

AWR = 2.00
H: $36.37

L: $35.86

NL: $34.87
Use Mon’s H/L to forecast
Weekly targets; update the N: $34.37
targets should a new H/L form
ADR WEEKLY TARGETS

N Bull: WL + AWR
NL Bull: WL + (AWR x .75) N: $37.86
NL Bear: WH - (AWR x .75)
N Bear: WH - AWR NL: $37.36

AWR = 2.00
H: $36.37

L: $35.86

N: $34.87
Price traded right into our N: $34.37
forecasted bull targets
ADR WEEKLY TARGETS

The Initial Forecast gave us a great

starting point for identifying the N: $37.86
week’s potential price range
NL: $37.36

N: $34.87
N: $34.37
ADR STOPS
ADR Stops offer a simple, price-based method for calculating loss stops
based on current market volatility and recent price behavior.

ADR STOPS ADR STOPS

Uses a percentage of
average price range
1. Simple; effective
2. Great for any style or
duration of trading
3. Price-based; self-adjusts Entry
to current volatility -ADR
4. Use 50% of the Average x .50
ADR Stop
Daily Range (ADR)
ADR STOPS
ADR Stops use 50% of the 5- or 10-period Average Daily Range, which
should be calculated before each session.

• ADR Stops allow you to define your

trade risk according to the most recent
price movement

• Allow for easy integration with your

preferred risk management approach

• Use 50% of Average Daily Range

• Calculate the ADR Stop value each day

• Easy to calculate; easy to implement

ADR STOPS

ADR (10): 1.91

ADR Stop: ADR/2 = .96

N Bull: $109.96

Entry: $105.58
ADR Stop: $104.62
ADR STOPS

ADR Stop: $68.32

E: $67.94

Bear: $65.90

ADR (10): .76

ADR Stop: ADR/2 = .38
SCALING AND TRAILING
TECHNIQUES
SCALING & TRAILING
Using high-probability price-based ADR Targets provides the flexibility to
scale and trail positions in a variety of ways.

SCALING TRAILING
Using 2-, 3-, and 4-Part Trail price using an ATR-
scales at ADR Targets based approach
1. Scaling provides 1. Simple; effective
flexibility 2. Consistent approach
2. Scaling reduces risk 3. Price-based; self-adjusts
3. Scaling creates a habit to current volatility
of booking profits 4. Use a 1-ATR trailing
4. Scaling improves the stop for short-to-med
trader psyche term trades
5. Scaling can also lead to 5. Use a 1.5 to 2-ATR
“risk free” trades trailing stop for longer
term trades
SCALING TECHNIQUES
Scaling out of trades provides great benefits, including risk reduction,
consistently booking profits, and improving trader psychology.

2-PART 3-PART 4-PART

SCALING SCALING SCALING
Scaling out of your trade Scaling out of your trade Scaling out of your trade
in two parts in three parts in four parts
1. Scale 1/2; 1/2 1. Scale 1/3; 1/3; 1/3 1. Scale 1/4; 1/4; 1/4; 1/4
2. Scale 2/3; 1/3 2. Scale 1/2; 1/4; 1/4 2. Scale 1/5; 1/5; 1/5; 2/5
3. Scale 1/3; 2/3 3. Scale 1/4; 1/4; 1/2 3. Scale 2/5; 1/5; 1/5; 1/5
4. Scale 1/4; 3/4 4. Scale 1/4; 1/2; 1/4 4. Scale 1/4; 1/4; 1/4;
5. Scale 3/4; 1/4 5. Scale 2/5; 2/5; 1/5 Trail 1/4
6. Scale 1/2; Trail 1/2 6. Scale 1/4; 1/4; Trail 1/2
2-PART SCALING

A sound scaling
approach involves
selling the bulk of your SELL 1/4 --> N Bull: $33.80
position at the target
with the highest odds SELL 3/4 --> NL Bull: $33.39
of being reached

Entry: $32.36

10-day MDR Targets

3-PART SCALING

(Sell 1/4) 10-Day NL: $65.90

7-Day NL: $83.39 (Sell 1/2)
5-Day NL: $82.88 (Sell 1/4)

E: $81.08

Another sound approach is to scale out of your

position at different durations of MDR targets;
remember, the NL target has a much higher
chance to be reached, so make these the priority
4-PART SCALING

(Sell 1/5) 15-Day NL: $36.99

(Sell 2/5) 10-Day NL: $36.01
5-Day N: $35.20
3-Day N: $34.53 (Sell 1/5)
(Sell 1/5)
.74
$ 3 2
E:

If the expected trade

duration is longer than usual,
then scale out at the Normal
targets earlier in the trade
FREE TRADE TECHNIQUE
The Free Trade Technique is a 2-part scaling technique that allows you
to position yourself with a risk-free trade after an initial favorable move.

• A conservative 2-part scaling FREE TRADE TECHNIQUE

technique; defensive approach
• Allows you to eliminate risk
from your trade after an initial
favorable move
• Allows you to “dip your toe”
into the trading waters
• Allows you to proceed with
caution during volatile markets
An easy scaling technique that helps
position yourself for a risk-free trade
1. Calculate your risk on the trade
(Entry price - Stop Loss price)
2. Project this amount higher from your
entry price (Free Trade Zone)
3. When price reaches your FTZ, sell
half of your position
4. Leave your original stop for the last
half of your position
5. You now have a free trade; you lose
no money if you are stopped out
FREE TRADE EXAMPLES
EXAMPLE 1
Learn 1. Risk Per Share: $1.50 (Entry Price - Stop Loss Price)
2. Free Trade Zone: $42.50 (Entry of $41 + $1.50)
to trade... 3. Sell Half: Sell 1/2 the position at $42.50
4. Keep Half: Let 1/2 ride with original stop loss of $39.50

EXAMPLE 2
...with house 1. Risk Per Share: $0.75 (Entry Price - Stop Loss Price)
money 2. Free Trade Zone: $22.50 (Entry of $21.75 + $0.75)
3. Sell Half: Sell 1/2 the position at $22.50
4. Keep Half: Let 1/2 ride with original stop loss of $21.00
FREE TRADE EXAMPLE

ADR (10): 1.91

ADR Stop: ADR/2 = .96

FTZ: Entry + Trade Risk = $106.54

N Bull: $109.96
Once price hits the FTZ,
there’s no risk in the
trade anymore; frees
your mind
FTZ: $106.54 (Sell 1/2)
Entry: $105.58
ADR Stop: $104.62
FREE TRADE EXAMPLE

ADR Stop: $68.32

E: $67.94
FTZ: $67.56 (Sell 1/2)

Bear: $65.90

FTZ: 67.94 - .38 = 67.56

ADR (10): .76

ADR Stop: ADR/2 = .38
TRAILING STOPS
While the PivotBoss preferred method of trade management involves
playing to profit targets, trailing stops can have a big impact.

TRAILING TRAILING TECHNIQUES

Trail price using an ATR-
based approach
Trailing stops can be quite powerful, and knowing how
1. Simple; effective
2. Consistent approach
3. Price-based; self-adjusts
to current volatility
4. Use a 1-ATR trailing
stop for short-to-med
term trades
5. Use a 1.5 to 2-ATR
trailing stop for longer
term trades
AND TIPS
to use them creatively can be a huge advantage
1. Use a 1-ATR trailing stop for most of your trades
2. Use a 1.5 to 2-ATR trailing stop for long term
trades. Consider moving to a weekly chart, too.
3. Consider using a trailing stop at the beginning of a
new Markup or Markdown phase
4. Use a trailing stop on the last step of a scale,
preferably on the lightest scale portion
5. Consider trailing on the 2nd half of a Free Trade
SCALING & TRAILING

Scale the bulk of your position at a high-

probability target, then trail using 1-ATR

SELL 3/4 --> 10-Day NL: $33.39

TRAIL 1/4
Entry: $32.36
SCALING & TRAILING

Scale out of your position at a

cycle high, then trail the rest

(Sell 3/4) 10-Day NL: $65.90

E: $81.08
TRAILING FOR BIG GAINS

Look to trail for big

gains when a market
looks to be transitioning MARKUP
from an Accumulation
to Markup phase

Trail with a
Entry: $36.15 2-ATR stop
ACCUMULATION
THE FREE TRADE TRAIL

E: $67.94
FTZ: $67.56 (Sell 1/2)
Trail 1/2
with 1-ATR

It’s a FREE trade, why

not trail the rest of the
position for a big gain?
THE FREE TRADE TRAIL

E: $67.94
FTZ: $67.56 (Sell 1/2)

Trail 1/2
with 2-ATR

...or trail for

a HUGE gain!
RISK MANAGEMENT
RISK MANAGEMENT
Trading success is not about how you trade, but how well you
lose and how well you manage risk.

• Risk is unavoidable, so you must

actively control/manage it

• You cannot control the markets,

but you can control your money
and your risk on each trade

• Risk management optimizes your

trading capital

• Take care of your risk first and

foremost, and the profits will come
RISK MGMT TOPICS
“The whole secret to winning in the stock market is to lose the least
amount possible when you’re not right.” - William O’Neil

PROPER
5 RULES OF POSITION
RISK MGMT SIZING

DEFINING DEFINING
PORTFOLIO TRADE RISK
RISK
THE COIN TOSS EXERCISE
The Coin Toss Exercise is used among educators to teach probabilities,
and is also used to introduce risk management to traders.

Regardless of how you enter

a trade, risk management is
the biggest component to
profitable trading.
COIN TOSS EXERCISE
Flip a coin 100 times and write
down the results of each toss
1. Each “Heads” is a winning trade
2. Each “Tails” is a losing trade
3. Each winning trade makes $200
4. Each losing trade loses $100
5. Calculate your results

My results:
49 winners (+$9,800)
51 losers (-$5100)
Net: +$4,700
COIN TOSS RESULTS
$25,000

$20,750

$16,500

$12,250

$8,000
1:1 1.5:1 2:1 2.5:1 3:1 4:1
LIVE APPLICATION
The next step of the Coin Toss Exercise is to engage the market using
your preferred Reward:Risk ratio, triggering live (or simulated) trades.

The goal of the exercise is to COIN TOSS EXERCISE:

make triggering entries and
applying risk management a
machine-like routine, without
emotion nor deviation.
LIVE APPLICATION
Trigger each entry by flipping a coin. Do this ten
times and write down the results of each trade.
1. Each “Heads” is a LONG trade
2. Each “Tails” is a SHORT trade
3. Each trade uses a profit target of 2 points
4. Each trade uses a stop loss of 1 point
5. Calculate your results

Prop Firms use this exercise for new

traders, typically on the ES (6ticks/3ticks)
5 RULES OF RISK
MANAGEMENT
5 RULES OF RISK
MANAGEMENT
Risk Management is the most important aspect that separates
professional traders from the rest.

5 RULES OF RISK MANAGEMENT

Risk Management rules to trade by:
1. Use the 2 Percent Rule
2. Use a pre-determined Reward:Risk ratio
3. Always know your risk/exit before you enter a trade
4. Never add to losing positions
5. Limit your losses to a daily amount
 DEFINING PORTFOLIO RISK
AND PROPER POSITION SIZING
THE 2 PERCENT RULE
The 2 Percent Rule is a basic tenet of risk management among
professional traders that states you should risk no more than 2% of
your trading capital on any one trade.

• Risk no more than 2% of your

trading capital on any one trade

• Provides an easy and consistent risk

management approach

• While 2% is the Rule for Pros, retail

traders should also consider 1%

• The 2% Rule encompasses Portfolio

Risk, Position Sizing, and Trade Risk
194 LOSERS IN A ROW
A Fixed Risk approach to risk management optimizes your trading
capital and keeps you in the game longer.
450

390
Fixed Risk Approach with $100,000 Starting Capital

# Trades
300

194

150 129
97
77
64 54
47 42 38
34 32 30 26 26 24
22 21 20 19
0
1% 2% 3% 4% 5% 6% 7% 8% 9% 10% 11% 12% 13% 14% 15% 16% 17% 18% 19% 20%
APPLYING THE 2% RULE
The 2 Percent Rule is easy to incorporate into your trading plan, and will
help you establish a consistent implementation of risk management.

THE 2% RULE CAPITAL

Risk no more than 2% of account
value on one trade AT RISK
1. Calculate 2% of your account (Capital at Risk) The Capital at Risk for
2. Subtract trading commission & slippage from various account sizes
Capital at Risk (Maximum Permissible Risk)
3. Calculate the difference between your entry $10,000: $200 $20,000:
and stop prices (Risk Per Share) $400
4. Divide Maximum Permissible Risk by Risk Per $30,000: $600
Share to arrive at the amount of shares you $50,000: $1,000
can trade $75,000: $1,500
5. Recalculate after every trade, as each new $100,000: $2,000
trade requires your new trading balance
2% RULE EXAMPLES
Do not think EXAMPLE 1: $20,000 ACCOUNT
about how much 1. Capital at Risk: $400 ($20,000 x .02)
money you can 2. Maximum Permissible Risk: $390 ($400 - commish)
make on a 3. Risk per Share: $1.25 (Entry of $25 - Stop of $23.75)
4. Number of Shares Allowed: 312 shares
trade...

...Instead, think
about how much
EXAMPLE 2: $50,000 ACCOUNT
money you can 1. Capital at Risk: $1,000 ($50,000 x .02)
lose if you are 2. Maximum Permissible Risk: $980 ($1,000 - commish)
3. Risk per Share: $1.75 (Entry of $63 - Stop of $61.25)
wrong! 4. Number of Shares Allowed: 560 shares
2% RULE & ADR STOPS
ADR Stops allow for an easy way to incorporate risk management
measures like the 2% Rule into your trading approach.

USING THE 2% RULE

WITH ADR STOPS
1. Calculate 2% of your account (Capital at Risk)
2. Subtract trading commission & slippage from
Capital at Risk (Maximum Permissible Risk)
3. Calculate the current 5- or 10-period ADR
4. Divide the current ADR by 2 (Risk per Share)
5. Divide Maximum Permissible Risk by Risk Per
Share to arrive at the amount of shares you
can trade
6. Recalculate after every trade, as each new
trade requires your new trading balance
GETTING STARTED
Getting started with proper Trade and Risk Management can simple;
even the simplest form of trade/risk management is better than none.

GETTING STARTED
3 Steps to getting started with a Trade & Risk Mgmt approach:
Step 1: Start using the 2% Rule, with ADR Stops
Step 2: Use the Free Trade Technique, with ADR Targets
Step 3: Start with a Reward:Risk ratio of 3:1
FINAL THOUGHTS
Trade and Risk Management do not provide the sizzle of some
other aspects of trading, but these affect your bottom line the most.

• Trade Management relies on a pre-

determined plan; build your plan & stick to it

• Monitor your plan periodically; adjust and

improve it as necessary

• Risk Management is the “Holy Grail” of

trading; the most significant contributor to
consistent profitability

• Develop your Risk Mgmt approach and stick

to it! Consistency is key to a winning solution