Find Frank's website by clicking here.

Tim Bourquin: Hello everybody and welcome back to TraderInterviews.com. Thanks for joining me for another show this week. We're going to be speaking with Frank who is a full-time trader. We're going to talk to him about how we approaches the markets and finds good opportunities, and just basically his overall philosophy and his way of looking at the markets to make money. So, Frank, first of all thanks for joining me on the phone today.

Frank Ochoa: Thanks for having me. It's a pleasure.

Tim Bourquin: All right. So let's talk about what type of trader you are first whether it be a day trader, a swing trader and then what markets do you trade.

Frank Ochoa: I'm mainly a day trader and, you know, I look at markets on a kind of a real time basis, minute to minute, 5-minute, 15-minute charts. I'm mostly a day trader focusing on futures markets like the E-minis, even the energies as well. But you know I come from an analytical background as well so I analyze across all timeframes and all types of trading. But more personally, I'm more focused on intraday real-time trading and I will incorporate some swing trade in as well every once in a while.

Tim Bourquin: All right. And in your bio, it talks about using pivot-based methods. Talk about what you mean.

Frank Ochoa: I'm a big firm believer in using pivot-based analysis in my trading. I like price-based indicators. Indicators, you know, like floor pivot, something that a lot of folks have used for decades and find reliable. So I like pivot points, methods, anything that allows me to have a leading indicator on my charts that I know where the levels are going to be before the market opens because that helps me develop a plan of attack for the upcoming day -- so pivot-based methods, price-based indicators. I started off with floor pivots and incorporate the pivot range. I also like other forms of pivots as well. And you know even like market profile levels. I'll call those pivots as well, any horizontal support or resistance level that's based on actual price based activity, activity from the charts I think gives me an edge and that's usually the approach I take.

Tim Bourquin: Let's start from the very beginning for listeners who may have even heard the term, but not sure what it means because there are different ways to calculate it. What exactly is a pivot point?

Frank Ochoa: A pivot point, the way I look at it is a level that's basically generated by using some type of formula or equation and it can be seen as support or resistance for the upcoming session depending upon the trend of the market. So that level may be support in an uptrend, it may be resistance in a downtrend, but a pivot point is basically some level that's derived by using a formula or equation and the inputs are maybe the high, low, and close from a prior period of time, usually the prior day. It could be week to week so you use the prior week's high, low, and close to generate levels for the upcoming week and so forth. So for me, it's mostly looking at pivot points in terms of where is resistance or support for an upcoming session and what's the overall trend of the market so then I can then use that level in a most responsible manner possible.

Tim Bourquin: All right. So I know a lot of people use just the previous day's high, low, close divided by three that's the pivot point for the following day. Is that the most common?

Frank Ochoa: That's the most common. That's the most basic pivot point that you can come across, high, low, close divided by three. That gives you what I call the central pivot point or the pivot or the pivot point for the next day. And then from there, you can use that pivot to generate additional areas of resistance above it and support below it and even a pivot range around it, which other famous authors have made to more of a mainstream pivot range. So definitely, that's the starting point and then from there, you have derivative forms of pivots and equations that come along with it.

Tim Bourquin: All right. Now, a pivot range, is that because just like on a Fibonacci line or anything else, rarely will it go to that number to the tick so you're looking more at kind of a loose area where something may happen. Is that kind of what you mean?

Frank Ochoa: No, that's absolutely right. I've always seen support and resistance or any line as more of a fuzzy zone instead of an actual level to the penny because that's quite rare, although it can happen. So a pivot range basically looks at that pivot point and has an additional buffer above it and below it to create a range. And that range I think hides so many clues to what could happen for the upcoming day in the market and I use it in so many different ways to help me plan my trades for the upcoming day.

Tim Bourquin: All right. Well let's talk about just kind of a generic chart where you have something that is rising maybe it's on an uptrend, it's rising into that pivot range. I think traders have a tough time when they first hear about kinds of zones or ranges, it's what do I do, what behavior am I looking for, am I looking for the first tick to come into that range to make a decision, do I wait for it to surpass it, the level and still stay in range? What behavior are you actually looking for when it starts to enter that area?

Frank Ochoa: That's a really good question and that is what a lot of traders have trouble with whether you're using pivots or any type of other analysis. It's what do you do, you know, once price is at that level what are you looking for to trigger an event like a trade. For me, I look at overall trend direction, that's number one for me. If you're trending up then you're looking to buy at support on the way up. It sounds very, very simple and, you know, it's a very simple concept, but it's a concept that a lot of people can lose focus on because they're so drilled into a 5-minute timeframe that they forget the overriding trend. And so if you're trending up, then the pivot range would be the low price and it would as support kind of like a stair step method on the way up. Each stair going upward is the next -- is pivot range and as price pulls back to it, you tend to find support in that zone. [0:05:52] So what I tend to look for is that first test at that range and using a 5 or 15-minute chart, you know, it depends on the setup, different setups require different timeframes for me. But on the way back, what I'm looking for is just basic candlestick setups at those levels. If I find a hammer formation that develops at that range, it means to me that responsive buyers are entering the market at that point, you're finding support and then from there I can establish a limit order at a zone that I feel comfortable with and allow price to come to me to fill on the way up. So what I'm usually looking for are basic candlestick setups and although they're basic, they're very, very powerful. I mean they just give you a lot of information. Like a general hammer, like an outside reversal, like a Doji, different types of setups that occur at a pivot range that lets you know that the tide is turning and you're likely to see buyers take over--

Tim Bourquin: Got it.

Frank Ochoa: -- in the case of an uptrend.

Tim Bourquin: All right. I like this. So you're a candlestick chartist and then the way -- you know, a Doji can appear anywhere, but a Doji within that zone like in that previous example if it's headed up and it's coming into a zone, you see a Doji there, it's in that pivot zone much more confident that it's about to turn with those two together?

Frank Ochoa: Absolutely. Candlestick patterns I think are very powerful, but they have to be used in proper context. So if you use them at the right places, at resistance or at support on those pullbacks in an uptrend or pullbacks in a downtrend, they're much more likely to be profitable and result in good trades. So they have to be used in context and that's the context I usually use them.

Tim Bourquin: Got it. Above and beyond those two things, do you look at volume or anything? Any third piece of information that would make you extra confident? If those two things make you confident, what would make you really confident that a move is about to happen?

Frank Ochoa: What I usually look to is the volume at price indicator. I really like volume at a price rather than just a standard volume at a bottom of a chart that's looking at volume at time. I think volume at price is a huge indicator because it's looking at where the market is changing hands. I mean where buyers and sellers are putting their money to work. So when you look at high volume areas or high volume notes, those zones right there can provide support in the context of a trending market as well. The market will usually tend to push price back toward an area of fair value and when you find those zones of high value areas and they line up with a pivot range or they line up with a candlestick pattern in the context of an overriding trend, I think that's a three-way combo for success right there.

Tim Bourquin: All right. Does that look different than the standard volume bar you mentioned at the bottom of the chart? Instead of looking for volume during a time period, which is what that shows, you're looking specifically at volume at whatever that price is at that moment?

Frank Ochoa: That's right. So volume at price is an indicator that usually is plotted vertically on, you know, either side of the chart usually on the price side or on the opposite side. So it's basically plotted vertically up the side of the chart and it's looking at all the cumulative volume at a certain price level. And you know they can be a real time developing volume at price indicator so it's looking at only the trades for today and you know that a certain area has the most volume. That's seen as fair value for the day. Or you can look at it from a week-to-week basis, day-to-day basis and expand it out as well. So you can look at higher timeframe areas of high volume nodes or even low nodes because each of those zones tell a story about where price has been and where it's probably going in the future. So that's a visually stunning indicator and once you get it on your chart, it's hard to trade without.

Tim Bourquin: Now, I like this a lot. It's simple, but I understand it. You know, I talk to a lot of traders on this show that I kind of get their methods. That's happening less and less thankfully as I am evolving as a trader myself. But this seems very simple. It's very objective. Let's talk about then how you use this information to maybe set stops, profit targets that sort of thing. Can you talk about how you do that? [0:10:18]

Frank Ochoa: Yeah. Well, the way I approach the market is by planning out, you know, some type of plan of attack for the upcoming day. I like to plan my trades and then I try to execute the plan as much as possible. If I can identify areas of support and resistance for the upcoming day and I can identify where price is likely headed if a reaction occurs at those zones, then I can kind of get some kind of blueprint that I just follow for the upcoming day. It helps to keep you focused at the task at hand. It helps to keep you in line and not fire from the hip. So what I do is I look at the market, I use my tools and identify areas for entries the upcoming day and of course I have contingencies as well. So if price opens in this zone, then I want to buy here. If price opens below the zone at this level then I want to sell here. And once I do that, I identify these zones and when price tests those levels, it's my job as a trader to follow the blueprint and execute that trade. Once I enter the market at that point, it depends on the types of setup on how I'm exiting and managing these trades. Certain setups I think require specially trade management. If you're looking at trading the trading range market and you're going to trade to a target, keep your stops tight. If you're looking to trade at trending or breakout market, you may want to loosen up your stops a little bit and allow the profit to increase and allow that trade to run. So depending upon which approach I'm using, I'll deploy certain tactics on the backend for trade management and I'll also us basic things. I really like to use things that are based on price or volume just actual market generated information. And from that perspective, I'll look at the average range of the day over the last ten days for example and if the YM or the Dow has an average currently at about 250 points because there's been an increase in volatility over the last month or so of trading, then you can use that as a point of reference for the upcoming day. If you hit a trade and you get in at a very good spot, you can then say, okay I think this is around the low of the day, extend that up 250 points or down and create a target and then work towards that target scaling along the way. There's so many different ways to approach and it's more situational on my side.

Tim Bourquin: It sounds like each evening you develop a set of if-then statements almost, which is Corey Rosenbloom, which is one of our other interviewees on the show, he loves if-then statements in terms of trading decisions.

Frank Ochoa: Absolutely. That's absolutely the way I approach it is this is my primary idea or theory of what could happen in the upcoming day. If the price opens here, I'm getting in here and I'm looking to exit at these levels. If price doesn't do that and the market rejects your theory, then that gives you information as well and now I'm looking to, you know, use this course of action and change my approach. But all of that is stipulated head of time so that, you know, I'm just following a blueprint instead of being in the heat of the moment and getting caught off guard and doing something that I would regret later.

Tim Bourquin: Are you flipping through a lot of charts to find these zones in these areas and to find these patterns and setups with the candles? I mean do you have a basket of stuff that's kind of your staple?

Frank Ochoa: That's a good question. I mainly trade E-minis so I have those five main E-minis, the S&P 500 E-mini, the S&P 400, Russell 2000 etc. But I also have a stable of stocks that I like to keep my eye on as well and just analyze just for practice or to write about so that others can read analysis. So things like Netflix or Apple, RIM, you know, just stocks out there that a lot of people focus on and have a lot of volume and price activity that you can build these based off of, build your plans based off of. So I do have certain stocks that I throw in there, but mainly this analysis is for -- you know, when I create a plan, I'm not creating a plan for a whole lot of stocks, I'm doing it for what I intend to trade the upcoming day.

Tim Bourquin: Yeah, speaking of Netflix, by the time listeners hear this it'll be a few weeks after we've recorded, but man, trying to find an area of support for that stock right now is tough.

Frank Ochoa: Falling knife is a very good term for that. Well right now, it's nothing like it.

Tim Bourquin: Are you trading that right now? I mean do you have any tips for trading something that's moving like that where, you know, the only support you can find is on maybe a yearly chart or something? [0:15:07]

Frank Ochoa: You know, I am not currently trading that one. I wish I had gotten short there. There were a few cues up top that, you know, help to identify a potential opportunity to go down, but obviously you never forecast anything of this nature and I'm not one to try and buy into aggressive selling that way it's currently looking at. So usually I'm trying to ride the current direction and I'd look for right areas of potential selling points in that stock right now just to kind of ride the wave lower. So I usually go towards the path of least resistance and if a stock price is going down, I'm not trying to outsmart the market and buy it, I'm trying to just find my entry and go in the path of price.

Tim Bourquin: All right. Let me follow up a little bit more on that, the entry point and where you make a decision to start scaling in. On our previous example or on a new example where something is coming in to a zone, you see a Doji meaning it may reverse, you see the volume on price behaving as you would like to see it, where exactly are putting the entries and are you using a market order around that Doji candle or how do you then decide how much to get in and scale in with?

Frank Ochoa: That's a good question and usually what I'm doing is limits all the time and what I tell folks when we're talking trading is retire the market order and stick with limits. Limit orders have so many, you know, great things about them that help a trader along the way. I mean it reduces slippage, it helps you, it forces you to do your homework and identify a zone that you'd like to enter at instead of just pushing the market buy order and getting in wherever the market tells you. Instead, you're able to let price come to you and fill out a zone that you've researched ahead of time. So there's a lot of good things to like about limits. And what I'll do is when price is coming into a zone, depending on what that candlestick pattern looks like or how aggressive buyers or sellers are at that zone, I'll just put price halfway down a candlestick and just let it come back. Because usually price doesn't go open to close, open to close without any wicks on either side. You know, usually you see a little bit of a backfill where the market is trying to retread and test prior zones or price areas. And then when buyers or sellers into the market then you see a continuation. So what I do is if I see a Doji or if I see a hammer and identify that as a buy zone, then if I'm going long, I'll put a limit halfway down that prior candlestick or if in the case of a hammer then put it somewhere along where that wick is. And just be patient because I think patience pays in this instant. Because you know if you're trying to gain a couple of points on the EF if you gain a half point or a point on the entry from where the market would have gotten you in, then you're ahead of the game already and you don't have to play as far. So I think you can make money on the entry before you even get into a trade by planning an entry and using the limit order and that's usually the approach I take, I mean 99.65 of the time that's what I'm doing.

Tim Bourquin: And that takes some discipline too, right, waiting for that to happen because I can easily see myself even today, you know, it's hard. You see that, you put that order in and it's coming down, but now it's starting to head back up again, I'm going to miss it, I'm going to miss it. You try and move that limit order up. I mean that must have taken some discipline to kind of stick with it and just wait for it to come to you.

Frank Ochoa: It absolutely takes discipline. But I think the traders that employ the most discipline are the ones that are consistently profitable. There's many times where I'll get too aggressive on a limit and actually miss the trade so then I've left money on the table by missing the trade completely. And I try not to get upset with myself for doing that because I'm just doing my job. I'm trying to buy at the best price possible. It's like going to the store and instead of buying something full price, you wait for it to go on sale and when it goes on sale you've gotten a better entry and now you feel better about your fill and price is probably headed back up because it was on sale. And so now you've gotten a better price and you're ahead of the crowd. So I think definitely if you use a limit order and you identify those price zones ahead of time homework only pays off in my opinion.

Tim Bourquin: And are you putting in hard stops or more mental stops outside of that zone?

Frank Ochoa: They're always hard stops, at least the fixed loss. For me, a fixed loss is always a hard stop, you know, because right now in the age of technology, you've just got to protect yourself at some point and with power outages or with networks going down and all kinds of chaos that could happen surrounding electronic trading, I think a hard fixed loss at the very least. The rest are usually virtual stops even if it's trailing profits or fixed profits stops of some sort, those are virtual where my machine sees them but the market doesn't. But I think there's a protective stop that I need in order to feel comfortable trading. [0:20:32]

Tim Bourquin: How is it that you came to pivot points as your preferred method of trading? What was it about that that drew you to it and made you confident about your decisions?

Frank Ochoa: It was just looking at a lot of charts, right. I had a trader approach me asking if I had heard of floor traded pivots at one point and if I found them useful. I said, you know what I hadn't really heard of those and this was over a decade ago. So I started researching them and I just threw them up on the charts. At first you draw them by hand but then of course as platforms has gotten better, you can program them in or have them in a base library, pull them right up. And by bringing them up and just looking at charts, you begin to see some important relationships and how price responds to them in certain market environments. And you know, the proof is in the pudding. You look at a chart and you see price responds to those zones, you know there's something to them and to me that's an edge. If you know that you can depend on these areas of support and resistance to continue to work especially in certain market environments then you can feel confident in your approach and feel confident pulling the trigger.

Tim Bourquin: I like that because any trader can do that right now. Without trading it, they can just see how it works. Put the pivot points up there and see how your favorite stock or your favorite index racks to it and eventually I think you probably get to know the behavior and see when it does certain things that the pattern is more likely to play out. And you only know that by watching it day in and day out.

Frank Ochoa: No, absolutely. I mean just put them on the charts and just observe and that's always the way I've learned in the past is just seeing for myself, researching for myself and seeing what works for me and then adapting concepts that I've learned to suit my type of trading style. And I think when people put up pivots on their charts and use them in a manner that I like to use them, what I usually see is that folks really become interested in them and incorporate into their trading in some form or fashion.

Tim Bourquin: Now traders can pick a lot of different levels to choose. They can choose Fibonacci or they can do pivot points and there's other levels that they can use. Eventually, they get so many lines on their chart at so many different areas that it's hard for them to even see the price action anymore. Do you recommend putting any other levels to see if there's some confluence if maybe a pivot level matches a strong Fibonacci level? Would that help in you trading decisions at all?

Frank Ochoa: Absolutely. I'm a firm believer in confluence. You know, whether it's confluence among different indicators or multiple timeframe areas of confluence, I think they really, really help because they're basically a call to action to different types of traders. Somebody may look at Fibonacci areas and if that level corresponds with the pivot point for the next day, now you have Fibonacci players entering at that level. You have pivot players entering at that level and it's a call to action to different types of players and more money is being put to use at that zone. It creates this self-fulfilling prophecy and more price action as a result. So I'm always looking for areas of confluence and some of the things that I do is use the pivots like a pivot range and incorporate like the Camarilla equation pivots or incorporate market profile levels. And if those zones line up in the upcoming day, there's much more emphasis at that zone in my opinion. So what I do is I look at that area as an area of confluence where certain market participants may enter the market and you're going to get more participation. So I think confluence is huge and especially multiple timeframe areas of confluence. So you can use floor pivots and just look at day-to-day pivots overlay the weekly and overlay, you know, monthly pivots and all of a sudden you have areas where day traders, swing traders, position traders are all putting money to use and if those zones line up, now you really, really got something on your hands.

Tim Bourquin: We've mentioned floor pivots quite a bit and then you mentioned another one, I think it was Camarillo pivots is that what you mentioned?

Frank Ochoa: That's right, that's right.

Tim Bourquin: Like the city Camarillo?

Frank Ochoa: Well I usually call them Camarilla, I've heard Camarillo. So there's various ways and you know I guess there's also various equations and formulas. And within these type of pivots I mean people take them and tweak them and you get various types of pivots, equations and formulas and there's a discussion on which ones are the real ones. With this one, it's kind of a little bit of a mystery around it as well, but I've been using the formula that I found very reliable and useful in my trading. If you can just have confidence in what you're doing on your end, that's about all you need and with that one, it's the same case. It flows perfectly with my other forms of analysis that I use with other forms of pivots or indicators and anytime I can add something like that to my trading arsenal it's always, always useful. [0:25:50]

Tim Bourquin: Is that something that someone could probable Google and find the formula for or find it in their platform?

Frank Ochoa: Absolutely. It's not usually in a standard library, but there's definitely formulas online, websites will have the formula and you can program it right into your platform or you can use calculators online, pivot point calculators online as well.

Tim Bourquin: Now let's talk about the thing that I think a lot of traders do is they wait for something to be 80% right. They want a pivot point that 90% of the time works and everything turns on a dime on this pivot point, but it's just not that easy. I wish it was. We all wish it was that easy. It never is though. Are there certain pivot points though that you find are more reliable on certain timeframes? I mean are the floor pivots better on a 5-minute than they are on a 15-minute or is there something that works really well for you?

Frank Ochoa: The floor pivots, I usually use the pivot range more so for cues, for potential price behavior. The width of a pivot range can be a huge indicator on what's going on. So even if they're not hitting in terms of price hitting these levels perfectly day to day, there are other cues around those pivots that I use as well to help me forecast potential price behavior. Whether it's going to be a breakout day or a trending sideways day or, you know, certain types of days, those pivots can help me. So I use them in so many different ways that even if they're not working on something else, they can help me in a different way as well. But I'm not usually one to wait for ten different things to line up in order to spark my in entry, someone once said that a man may know what to do and still lose money if he doesn't do it quickly enough. And so I try to be a little earlier than the crowd and just get in ahead of time based on a few cues that the pivots are giving me. You know, if it's trending, then I know my level that I want to get into right away and I just wait for price to come to me. So there's so many different levels of analysis that you could use with them. So even if the price isn't reacting to them perfectly, they still help you with additional layers of analysis going forward.

Tim Bourquin: All right. As we finish up, let's talk about goals for you. How do you judge success for yourself as a trader? Is it money, it is a dollar amount you want to make every year? What is it for you?

Frank Ochoa: For me, success is twofold. I was a market analyst in a prior job so success for me is just seeing my analysis come to fruition. I don't have to trade it and make money to feel good that my analysis was on point because eventually I'm going to get that trade and hit it. I can't trade every single opportunity, but I can see if my analysis was right. So that's goal number is just is my analysis right, how close was I to nailing those zones and that's number one. That inspires confidence and that helps you keep going forward. In actual trading in dollar amount, I think it's very important to definitely set goals for yourself. For me, you try to set goals for trade specific, you know, if it's this type of setup then I'm looking for this type of move, if it's this type of setup you look for this type of outcome and then overall expectations. So you've got to make at least a certain dollar amount a day and it just depends on the bank roll you're trading. I usually don't talk about trade management and how many contracts you trade here or there because it just all depends on your size of account. But for me, I just look for the analysis to be right and then my trade expectations for certain setups and how I'm nailing them. Of course, you journal it all so that you can go back and look at real results, real outcomes and then continue to mold and get better from there.

Tim Bourquin: And you mentioned a daily goal so I'll just go ahead and throw it there. Can we ask what it is? [0:30:01]

Frank Ochoa: For me, if I can make $500 to $1000 a day, that's usually pretty good in terms of just being consistent. But there are certain days where I have certain setups that I look for and when they come out then you need to put a lot more money to work and those are the days that I'm looking for a five-figure payday. Anywhere from 10 grand, 15 grand, 18 grand in a day.

Tim Bourquin: Yeah, I've heard that a lot, that traders two or three trades in a month will make their month because when they see that good opportunity they're almost like it's all in right. They got the good poker hand, they're going all in because that hand only comes around every so often.

Frank Ochoa: That's right. And I firmly believe that as well is the setups that I look for to really pound the table with, they only happen about three times in a month and those are the days that make your month. And the rest of the time you're chopping wood and just being consistent and trying not to lose your bankroll there. So most days, you know, you get a conservative goal and just try to just chip away, but then when the big days come up, that's when you look for the pay day and look for those five-figure paydays.

Tim Bourquin: All right. Frank, well you've been really patient with all of my questions, I really appreciate that. You've got a website, PivotBoss.com. Talk about what you do there.

Frank Ochoa: Yeah. PivotBoss.com started off as a blog site over a year ago and I've gotten some really great feedback on the blog post that I put up there. And my analysis, everything is forward looking, nothing -- usually I don't put anything in hindsight. All my analysis is for the upcoming day or week or whatever it is. So I put free blog content up there and I also sell my book, "Secrets of a Pivot Boss" from there, which has gotten great widespread acclaim that I've been extremely happy about. Then now, Pivot Boss is going to be evolving over the next few months and year as we're now adding education in the form of webinars and potentially subscription services to help traders identify and learn the types of trading and setups that I usually come across. So it's an evolving site right now, but so far a lot of folks really like it. They've given it great feedback and that's more fuel to continue on and make it even better.

Tim Bourquin: All right. Well listeners you can check out Frank's site, PivotBoss.com. We'll link to it at the end of the transcript for this interview so you can check it out and follow Frank along and see the kinds of pivots points and the things he's looking for in the market. Frank, thanks so much for your time today. I really appreciate you spending some of the time and talking about your strategy and your goals as a trader. I really appreciate it.

Frank Ochoa: Thanks a lot, Tim, for having me. It was great being here and great to discuss trading with you as well.

Find Frank's website by clicking here.