Swing Failure Pattern and Liquidity

Swing Failure Patterns (SFP) occur when price action attempts to swing above or below a price area of significance, but fails to do so and can either reverse the trend or provide a setup to trade a bounce with a good risk to reward ratio.

SFPs are also referred to as; Stop hunts and liquidity grabs.

SFPs can be found on all time frames (TF). However, the higher the TF the more significant an SFP can be.

SFPs are not guaranteed to reverse a trend entirely and may only result in a 'dead cat bounce'. Thus, one cannot trade off these alone and must have other factors of confluence to trade from.

Liquidity Areas are price areas where large amounts of trades and volume have taken place, and not had a huge impact on price.

The average trader will typically have their stop losses placed in these liquidity areas, because it seems like a safe place along with the majority of the market and their technical analysis (TA) supports this idea.

This is what separates Chart Champions from the average trader, because we can get a good idea of where the majority of the market have their stop losses (SL).

Having this insight gives us an edge and informs us to place a wider SL to avoid being hunted.

Time Stamps

3:00 – SFP INTRO

4:15 – WHAT IS LIQUIDITY?

• Most stop losses are set to market order - Hence one could expect this to be an area of liquidity
• Bigger traders will often target the stop loss areas to get bigger orders filled.

10:34 – SWING FAILURE PATTERN

• An attempt to take a "swing" above or below a significant low or high
• SFP occurs on all time frames
• SFP can either trade into a short term retracement or a complete reversal

13:26 – SFP EXAMPLES

18:13 – FROM SCALP TO SWING

• SFP often present the opportunity for a scalp trade to become a swing trade

20:31 – HOW TO TRADE SFP AS A BEGINNER

• Wait for the price to take the high
• Wait for a candle close below the previous high and back within the local range
• TP at the bottom of the range
• Optional - Compound or let the trade run as you change market structure

21:56 – HOW TO TRADE SFP ADVANCED

• Look for trapped traders
• High activity at the lows
• Longs getting stopped out
• New shorts opening (Breakout traders shorting at the bottom/breakout becoming trapped) NOTE: This is not a strategy by itself
• Open Interest and Delta provide extra confluence
• Look for demand to show up
• Look for big buying imbalances
• Increase in Open Interest / New LONG Positions opening
• Change in market structure
• Look across all Time Frames

31:23 – DO NOT TRY AND CATCH THE KNIFE

• The reality is; this strategy is more complex than it appears on paper.

35:00 – BTC TA + EXAMPLES

46:02 – Q&A

58:34 – SUMMARY

EXAMPLE: BONUS VIDEO