Lesson 1.5: Defining Institutional Swing Points

Introduction

• Institutional Swing Points:
  • These are not just simple price patterns but involve understanding what's happening behind the scenes in the market.
  • Focus on two main forms: Stop Run and Failure Swing.

Swing High/Low

• Swing High: A high with lower highs on both sides.
• Swing Low: A low with higher lows on both sides.
• Originated from Larry Williams, simple and easy pattern.

Institutional Swing Points

• Conceptual Understanding:
  • Avoid focusing on charts initially, understand the concept.
  • Only two forms in institutional trading: Stop Run or Failure Swing.

Two Forms of Swing Points

1. Breaker

   • Market makes a higher high, fails, and then breaks down.
   • Deceptive as it initially seems like a breakout.
   • Importance: Most powerful price pattern.

2. Failure Swing

   • Resistance level is not breached again after a retest.
   • Often occurs when a higher high isn’t achieved after a resistance level is tested.
   • Offers both buy and sell opportunities.

Breaker Pattern

• Characteristics:

  • Market rallies to resistance, fails, and creates a short-term low.
  • Breaks down aggressively after taking out a short-term low.
  • Provides high probability entry points.

• Details:

  • Aimed at trapping traders and manipulating market positions.
  • After a stop run, the market generally doesn't return to that level.

Failure Swing Pattern

• Characteristics:

  • Fails to break a resistance level or falls short of it.
  • Creates a new low/high but fails to retest the old low/high conclusively.

• Details:

  • Once a short-term low/high is broken, it confirms the pattern.
  • Creates opportunities when market structure shifts.

Trading Strategies

• Institutional Reference Points:

  • Must have these marked on charts (order blocks, gaps).
  • Not having these will lead to missed opportunities.

• Approach:

  • Practice in demo accounts to build confidence.
  • Use institutional strategies (buy at deep discounts, sell at premiums).

Conclusion

• Market Patterns:

  • Breaker and Failure Swing are the only two patterns needed to understand market reversals.
  • Encouraged to practice reading these patterns in the demo environment.

• Final Thoughts:

  • Understanding the patterns provides the highest probable entries and prevents chasing the market.
  • The focus should be on mastering these concepts for effective trading.