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Why the most profitable swing trading setup in the stock market is the episodic pivot (2022)

Updated: May 20, 2022

If there was a strategy to know when a stock is about to make a big move and then get in before most traders, would you like to learn that method? In this post, we will explore how explosive returns the episodic pivot setup can provide, compounding and takeaways.

Everyone has heard about the massive gains Tesla or Bitcoin would have given you if you bought them many years ago and had the discipline to hold through the ups and downs, and that is great if you identified them early, but what if you could predict and capture large moves lasting a few days to a few weeks a dozen times per year with minimum effort, would you do it? If you did, your returns would be immense as the compounding effect will do the rest of the job in your account. So, let’s dive right in.

How do I start?

There are several ways to start in the market, but if you are a person with limited access to the screens during market hours as most adults are, and still want to participate in the immense opportunities the market provides, what do you do? If you scour the internet, you will come across different methods on how to make money in the market such as investing in the SP500 index, buying ETFs, or investing in blue-chip stocks because you can just buy and hold, but what if that is not cutting it?

Let’s say you want explosive returns of 100-200-300% per year You have to learn a trading setup with edge and become a master of that setup. You have to compound your returns over periods of time unless you want to be a buy-and-hold investor where you have to hold through massive potential drawdowns.

Let’s say you really believe in AMBA over the long term, just look at what happened in the past months. Most would certainly not like to hold through such a steep decline. Anyway, what are the chances you are selecting a stock that is likely to go up more than 100% in a year anyway if you don’t have any stock selection skills?

The setup and why it works

There are different kinds of setups with an edge in the market, but one setup that consistently provides large magnitude moves every year is the episodic pivot setup. Episodic pivot is a marketing term, and it means story changer, one of the first traders to write openly about this setup is Pradeep Bonde, the founder of Stockbee. The thesis behind this setup is when sudden unexpected news hits the market and catches it off guard, a re-evaluation of the stock will take place. Depending on the severity of the news, this can lead the stock into explosive moves and long trends in both directions. As you may have noticed, such an occurrence happened in AMBA (picture above) in august 2021 before it went up 100%.

The perk with having a small account, let's say less than 3 million when trading this setup is the flexibility to move around very fast, meaning you can buy and sell the preferred amount of stock you want at any time without much slippage (assuming you are focusing on liquid stocks). The opposite is true for the big institutions with deep pockets and billions under management. When the re-evaluation of the stock happens after a major news announcement, the big players that actually drive prices will use days, weeks, and even months to reach the desired inventory of stock, they can’t just sell 5 million shares with the click of a button without affecting the price in a massive way. This is the edge the setup exploits. When the big institutions simultaneously want the stock after a news announcement, the price is bound to make a move over the course of time as they are slow movers and have to accumulate their positions.

Types of EPs

There are different kinds of situations that can lead to an episodic pivot in the market, and all are news-related. Here are a few examples:

· Drug-related studies and FDA decisions (Biotechnology etc)

· Government contracts

· Political decisions

· Earnings and guidance

Sometimes biotechnology stocks have drugs in trials for FDA clearance and if they get the approval, a big move will typically happen. Let’s say a biotechnology company found the cure for all types of cancers, it would be the mother of all episodic pivots and you can expect the stock to make an astronomical move as it would be able to sell its patent to the rest of the world and collect billions in revenue while helping millions of people worldwide for centuries. If you were one of the first ones to buy in after such an announcement you would have made a fortune.

Another example was a small company called force protection which was a producer of armored vehicles used against rioters with sales no greater than 5 million, but at the beginning of the Iraq war, they received several contracts from both the US and the UK government for more than 500 million with several additional contracts on the way. What do you think will happen when a stock gets a 100-fold increase in revenue over a short amount of time? The stock went up 1500% in a few weeks and it was later bought out by general dynamics.

So, your job as a trader when trading this setup is to pick out the situations where you believe the stock has a very high probability of making a big move, then you have to be one of the first ones to get in. There are several proven ways to find that information before the market open.

Is it a real EP?

EPs are usually easy to identify on a chart as they tend to be the starting point for new trends. But the day the stock supposedly has an EP, how do you know it’s a real one?

Plenty of stocks gap and crap, but a real EP always has the market's attention and won’t fade easily because of the immense buying pressure from all the market participants. Some people claim they can see all the buying on the level 2 and times and sales, but the only metrics that don’t act deceiving is the amount of volume traded.

If you study thousands of EPs, you will see a big spike in volume in almost all instances, sometimes 10-20-30x greater than the avg volume traded. If a stock has not traded any volume premarket and the volume seems low at the open, for instance only traded 25% of its average volume in the first 30 minutes the EP is extremely questionable as the first 30 minutes is usually the busiest part of the day. It's not uncommon to see a real EP trade its average volume the first 5-10 minutes. Volume is important because it is the fuel, no fuel no price fluctuations. It essentially means the desired interest in the stock is not present when it lacks volume.

In many cases, news can be hard to understand. Some stocks come out with seemingly good news, and they gap down and vice versa. One way to eliminate the ones where the market is not agreeing with the news is to focus solely on stocks that gap up. This eliminates all the instances where the market does not believe the news. It doesn’t matter how good the news is, if the market doesn’t agree with your thesis, you won't make any money. If you decide to study EPs, you will also find that most of them, at least the big movers start with a significant gap.

Let’s take a look at the math

If you are new, broke and an aspiring trader, just get rid of the notion that you are going to start out with 200$ and then build your way up to millions, it's not going to happen. You should get a job and save up, meanwhile, you should study profitable setups and build up the knowledge, you have to learn before you earn anyway. That being said, if you start out with an account of let's say 10 000$ it’s going to take some time for you to start making serious cash, but it’s possible, and if you do it the correct way the math will help you out tremendously. Let's take a look at an example.

You have done your work and studied, and you were able to capture 5 of these story changers over the course of a year. Then let's assume each setup returns 40% on average – it’s not uncommon to find EPs producing several hundreds of percent. The math will then look like this.

As you can see, you don’t have to be in front of the computer the entire day every day to make a killing in the market over the course of a year. In this case, you only picked out the ones that you had serious conviction in, and you only took 5 trades throughout a whole year. Selectivity is key with this setup, but if you learn to identify the big movers, become a specialist, and master this swing trading setup only the sky is the limit.


If you want to make millions in the market, you have to learn a setup. You can do this by studying the largest moving stocks yourself and finding what works, or you can get educated on how to pick out the best ones and speed up your learning curve tremendously. If you are interested in education, please check out Is this the starting point of your journey to becoming a profitable trader?

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