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1hr Swing Failure Pattern Notes


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1hr Swing Failure Pattern Notes

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  #1 (permalink)
Kingsport, TN
 
Experience: Beginner
Platform: Multicharts/Jigsaw
Broker: Optimus/CQG
Trading: Currencies
 
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Posts: 79 since Feb 2013
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The 1 hour Swing Failure Pattern (SFP) is something that I ran into in another forum, and have adapted too in my own trading. I normally trade Currency on the Spot market...but it may be interesting to others as the SFP is essentially a Wyckoff Spring. There are other Wyckoff threads in futures.io (formerly BMT), and other very good webinars on Springs here in futures.io (formerly BMT). The only difference I'm looking at is my own take on how I implement this for my own trading.

For my own methods I'm watching a Daily chart to see what kind of Trend Channel we're in. I'm plotting any 4hr and 1hr SFP levels that seem appropriate. I'm doing most of my trading on a 5 minute chart with the SFP's on it. A good setup on a 5 minute time frame seems to be a retest of a previous SFP level. These can be taken either as a touch trade at the level, or waiting for next bar close confirmation of the reverse.

Updating a Journal thread is always an after the fact sort of thing with me. But if you're following along with what I'm showing on my 4hr SFP levels you'll have a good view into my world.

I think of SFP's as platform independent since they are simply a trace of the Actions of Price. Having said that, I plot things on either a Oanda Java client or an Oanda MT4 client. Comments are welcome from anyone watching what I'm doing.

Best,

Eric.

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  #3 (permalink)
Kingsport, TN
 
Experience: Beginner
Platform: Multicharts/Jigsaw
Broker: Optimus/CQG
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Here is a EU Spot chart of some 1hr Swing Failure Pattern levels. If you were trading a 6E hourly chart this should look somewhat similar to what you have.

I tend to focus my attentions on the previous High of the Day (HOD) and Low of the Day (LOD) that are 1hr SFP levels as these are areas that can get revisited and reversed at. They also become important when the crowd sentiment tests these levels and Price closes beyond the level that it's testing (Price Breaks Through & Closes Beyond...PBT&CB).

What sometimes happens when Price is testing a SFP level, and PBT&CB, is that Price will retrace back to the level that it just tested. This level then can be re-tested when price swings away...comes back to it...and bounces off of it. I don't know that this will happen this time...but it happens sometimes (SFP ?).

You can add moving averages to the chart if you're comfortable with them, but you don't need them. You can add a Stochastic (like an 8-3-3) to the bottom of the chart if you're comfortable with it and it helps your decisions, but you don't really need it to trade the SFP. This is a clean chart here, but my Oanda Java client usually has both MA's and a Stoch on just because I've used them for so long. But, one of my mentors suggested that a Stoch, 2EMA's, along with the 1hr SFP lines was starting to resemble Chart Vomit.


Any 1hr candle high or low can be a playable SFP, not just the HOD and LOD lines. If you start using everything though you quickly reach the point of asking yourself "...which one of these levels is price going to respect and possible reverse on?". That is after all what we're trying to figure out here. Is this SFP level going to be a reverse level (a Reflection or Inflection Point), or is the Crowd Sentiment going to push price through it to some new level.


The crowd sentiment has reacted the the SFP level I'm showing in the 2nd chart and has bounced off of it. I'm located in the Eastern US time zone and my trading day is generally 7:00 AM to 11:00 AM. If I see a crowd reaction to a SFP level that I'm watching...and it matches up with the EMA's and Stoch...I will consider taking a chance on it.

Comments are welcomed.

Best,

Eric.

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  #4 (permalink)
Kingsport, TN
 
Experience: Beginner
Platform: Multicharts/Jigsaw
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Posts: 79 since Feb 2013
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Most of the folks that I hang out with at a different forum tend to be intraday (and inter-day) swing traders. They watch the SFP levels and try to use them to get into a 50 to 60 pip move. Most will be flat in cash by the end of the day. They do tend to bank something out any move when it goes into the 30 tick range. But you can use the SFP levels just as easily as a scalp trader, depending on time of day (like now after the London Closing), market liquidity, sentiments, momentums, and expected reactions to the SFP levels.

A reaction that looks like it will net you 3 ticks on a 4 tick stop, will not be what swing trader playing 2 contracts is going to be happy with. But a scalper, playing 40 contracts may be happy with a 3 tick reaction...if it's a highly repeatable 3 tick reaction. Your mileage may vary.

One of my friends not so jokingly says that all trades start out as scalps, and only become swings after they've gone into the green and you've moved you stop to Break Even. It's easy to spot the best tradeable reactions after the fact. Little bit different to have the courage to bite the bullet without having the hindsight of the historical move to fall back on.

In my mind the HOD/LOD 1hr SFPs look like good places to watch for a reaction. I'm going to keep my main charts in here very simplistic so as not to cloud the decision calculus with too many interlocking variables. I do better personally if I intentionally limit the number of trades I'm planning on, before I start trading.

Best,

Eric.

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  #5 (permalink)
Kingsport, TN
 
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The problem that I run into trading the SFP is keeping enough lines on-screen while at the same time not cluttering my landscape. The EU Spot 1 hr chart I'm showing here has several more SFP levels on it (but not all of them) and you can see where Price reacted to the levels.

But are these critters tradeable? Sure, on some time frame they are. But is taking a countertrend trade on Monday, based on a minor SFP level from Friday, a high percentage trade? No...it isn't. It is tradeable as a quick scalp based on the strong Resistance level that we had from Friday. And also because it's occurring before the main market goes active. But, unless I'm trading it based on a 5 minute average swing method (20 tick average swing size), I would not want to be going against this hourly trend. It looks like 12 ticks would be about the best you could hope for based on where the Price Flip support and resistance was from Friday and Thursday.


12 ticks would be a profitable scalp, but not a very good swing idea.

A better idea would be to see if price can break through the Friday resistance and close on the other side of it (PBT&CB). Then possibly get set up for a retrace back to it, and a trade back into the updraft as the main market pushes it along. That didn't happen today as the main market (RTH) sentiment pushed price through the resistance, and price action is now using the Thursday resistance (HOD) as a support structure.

Eric.

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  #6 (permalink)
SoCal, CA
 
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Nice Test bar on the up arrow on your last chart. In the top 1/4 of the 4hr downtrend channel from 1st of Feb. Maybe this downtrend is over.

Thanks for your journal.

If you have futures, look at 6E volume and compare it to your FX tick volume. Too see when there is alot of activity or not (in a bar(s) or wave Wyckoff)

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  #7 (permalink)
Kingsport, TN
 
Experience: Beginner
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Hi Hawk,
We may still be contained in the Daily down channel, as I'm showing here.


We are bouncing for the moment between two Daily timeframe LCS (Lower Close of Support) levels that are about 100 pips apart (1.28741 to 1.27785). I've marked it at the lower section of the channel with two thin blue boxes.

The bounce we had this morning sent us back into the channel body from the upper edge.


But since we didn't reach the bottom of this Daily channel, before it turned around and re-tested the upper channel edge...we may be seing a trend channel change back to the upside.



Best,

Eric.

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  #8 (permalink)
Kingsport, TN
 
Experience: Beginner
Platform: Multicharts/Jigsaw
Broker: Optimus/CQG
Trading: Currencies
 
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Posts: 79 since Feb 2013
Thanks: 152 given, 90 received

Since the upper channel edge was respected and price for the moment is headed back into the channel...where might it be going. Continuing to the lower edge is abour 200 pips away.

It's too soon to start second-guessing what might happen in a new up channel. But for that to come about, we would need to see price breakout of the upper side channel edge and migrate into a new upwards channel.


The tip off if this is happening is that price will stall without really moving into that blue box I have put in, that is going down 180pips to the lower edge of the current main channel. If the crowd sentiment hesitates going into this region...that may be a channel change tipoff.

None of this has much to do with one hour SFP, but it is part of the larger structure that we all operate in.

Best,

Eric.

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