I just wanted to identify a pattern with a pretty high success rate on higher time frames. The swing failure pattern is quite an easy pattern to spot, but takes patience to trade.
Notice back in March/April we had a low reached at 1.04615 and a higher low at 1.05183. This was a classic swing failure pattern and can be noticed on many charts on the 1H all the way to the 1Mo time frames. You can find it on lower time frames, however the success rate on the higher time frames is far greater due to lesser noise (and bigger moves). Note how price comes off of the low and comes back to try and test it. Sellers become exhausted at the 1.05183 level and demand comes in. To limit risk, you can place an order at the peak of where price came off of the low (the big blue arrow). Trading it this way can reduce your profits, however you are still provided with a pretty good R:R. What this also allows for is 0 latent risk. Latent risk is when you are waiting for a price to be hit, and so you develop certain biases. By placing an order, with an intuitive stop loss, you can then leave the trade - either price will hit or it won't. Generally with this pattern you can look for a move of twice the size of the peak as a first target. With correct money management on the way up (i.e possibly pyramiding your position) you can look to extend gains when price reaches that first target by taking some of your position off to limit risk, or locking in profits with a stop loss, as more advanced trading convention may dictate.
Of course, with any pattern, you must use your discretion - remember that the market still adheres to support and resistance, supply and demand and fundamentals, for instance.
N.B I have linked to a piece I wrote on order flow a few weeks ago to show why the blue box is there. Take a look if you wish.
Thanks, and happy trading.
Form your own opinions.
This is not to be interpreted as investment advice.
Trading leveraged products carries a potentially high level of risk.
Losses may exceed deposits.
www.admiralmarkets.com
Notice back in March/April we had a low reached at 1.04615 and a higher low at 1.05183. This was a classic swing failure pattern and can be noticed on many charts on the 1H all the way to the 1Mo time frames. You can find it on lower time frames, however the success rate on the higher time frames is far greater due to lesser noise (and bigger moves). Note how price comes off of the low and comes back to try and test it. Sellers become exhausted at the 1.05183 level and demand comes in. To limit risk, you can place an order at the peak of where price came off of the low (the big blue arrow). Trading it this way can reduce your profits, however you are still provided with a pretty good R:R. What this also allows for is 0 latent risk. Latent risk is when you are waiting for a price to be hit, and so you develop certain biases. By placing an order, with an intuitive stop loss, you can then leave the trade - either price will hit or it won't. Generally with this pattern you can look for a move of twice the size of the peak as a first target. With correct money management on the way up (i.e possibly pyramiding your position) you can look to extend gains when price reaches that first target by taking some of your position off to limit risk, or locking in profits with a stop loss, as more advanced trading convention may dictate.
Of course, with any pattern, you must use your discretion - remember that the market still adheres to support and resistance, supply and demand and fundamentals, for instance.
N.B I have linked to a piece I wrote on order flow a few weeks ago to show why the blue box is there. Take a look if you wish.
Thanks, and happy trading.
Form your own opinions.
This is not to be interpreted as investment advice.
Trading leveraged products carries a potentially high level of risk.
Losses may exceed deposits.
www.admiralmarkets.com
