Lesson 1.5: Defining Institutional Swing Points

Introduction

• Focus: Institutional Swing Points
• Basic Concepts:
  • Swing High: A high with a lower high to the left and right of it (3-bar pattern).
  • Swing Low: A low with a higher low to the left and right of it (3-bar pattern).
• Two forms of Institutional Swing Points:
  • Stop Run
  • Failure Swing

Institutional Swing Points

Conceptual Understanding

• Emphasis on conceptual understanding over charts and examples.
• Only two forms of institutional swing points: Stop Run and Failure Swing.

Stop Run (Breaker)

• Definition: Market makes a higher high, fails, then breaks down and rejects at the highs.
• Characteristics:
  • Surprising and deflating for traders.
  • Common experience: buying a specific price point expecting it to go higher, but it breaks lower aggressively after a new high is made.
• Formation:
  • Market rallies up to an area of old resistance (bearish order block, old low/high, etc.).
  • Price falls short, starts to trade lower, then makes one more pass higher, driving out the short-term high and spooking traders.
• Trading Strategy:
  • Identify a short-term low between the higher high and previous high.
  • If the market breaks down and takes out that short-term low, it indicates a market breakdown.
  • Sell if price retraces to the trigger point after the breakdown.
• Importance: Most powerful and dynamic price pattern for traders.
• Examples: Intraday charts provide numerous examples as this pattern materializes daily on every pair.

Failure Swing

• Definition: Market identifies a resistance level, trades through it, breaks down, then retests it and fails to make another pass.
• Characteristics:
  • If the market falls short and breaks lower, it's a missed opportunity for a breaker setup.
  • Focus is on the market's inability to make a higher high or higher low.
• Formation:
  • Market shows willingness to trap traders above or below certain levels and quickly reprices.
  • Identifies manipulation at certain levels.
• Trading Strategy:
  • Identify a short-term high or low after a failure to make a new high/low.
  • Wait for a retracement back to the identified level to enter a trade.
• Importance: Provides an alternative trading opportunity if a breaker setup is missed.

Practical Tips

• Daily Timeframe: Position traders need to wait for confirmation which may take an entire daily range.
• Institutional Reference Points: Importance of having key levels (order blocks, liquidity voids, fair value gaps) already marked on charts.
• Experience: Confidence and practice required to trade these patterns effectively.
• Demo Account: Practice in a demo account to build confidence and understand market behavior.

Conclusion

• Institutional Swing Points: Two main patterns - Breaker and Failure Swing.
• Learning Approach: Focus on these two patterns and practice identifying them on charts.
• Advice: Don’t rush to trade live money without mastering these concepts.

Good luck and good trading!