Friday, November 16, 2012

Failure Swing Top / Bottom

Failure swings are my favorite pattern. They are a clear sign of the inability of price to reaffirm a new high in an uptrend or a new low in a downtrend, which gives us the opportunity to spot a trend reversal before most do.
This is what they look like:

As you can see, this pattern is as simple as 1 - 2 – 3, but VERY powerful. A very common way of trading failure swings is trading the breakout of Point 2, with your stop loss above Point 3 when going short, and below point 3 when going long.

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