Swing Failure Pattern SFP [TradingFinder] SFP ICT Strategy

9월 4일

🔵Introduction

The Swing Failure Pattern (SFP), also referred to as a "Fake Breakout" or "False Breakout," is a vital concept in technical analysis. This pattern is derived from classic technical analysis, price action strategies, ICT concepts, and Smart Money Concepts.

It’s frequently utilized by traders to identify potential trend reversals in financial markets, especially in volatile markets like cryptocurrencies and forex. SFP helps traders recognize failed attempts to breach key support or resistance levels, providing strategic opportunities for trades.

The Swing Failure Pattern (SFP) is a popular strategy among traders used to identify false breakouts and potential trend reversals in the market. This strategy involves spotting moments where the price attempts to break above or below a previous high or low (breakout) but fails to sustain the move, leading to a sharp reversal.

Traders use this strategy to identify liquidity zones where stop orders (stop hunt) are typically placed and targeted by larger market participants or whales.

When the price penetrates these areas but fails to hold the levels, a liquidity sweep occurs, signaling exhaustion in the trend and a potential reversal. This strategy allows traders to enter the market at the right time and capitalize on opportunities created by false breakouts.


🟣Types of SFP

When analyzing SFPs, two main variations are essential:

Real SFP: This occurs when the price breaks a critical level but fails to close above it, then quickly reverses. Due to its clarity and strong signal, this SFP type is highly reliable for traders.




Considerable SFP: In this scenario, the price closes slightly above a key level but quickly declines. Although significant, it is not as definitive or trustworthy as a Real SFP.




🟣Understanding SFP

The Swing Failure Pattern, or False Breakout, is identified when the price momentarily breaks a crucial support or resistance level but cannot maintain the movement, leading to a rapid reversal.

The pattern can be categorized as follows:

Bullish SFP: This type occurs when the price dips below a support level but rebounds above it, signaling that sellers failed to push the price lower, indicating a potential upward trend.

Bearish SFP: This pattern forms when the price surpasses a resistance level but fails to hold, suggesting that buyers couldn’t maintain the higher price, leading to a potential decline.





🔵How to Use


To effectively identify an SFP or Fake Breakout on a price chart, traders should follow these steps:

1. Identify Key Levels: Locate significant support or resistance levels on the chart.
   
2. Observe the Fake Breakout: The price should break the identified level but fail to close beyond it.
   
3. Monitor Price Reversal: After the breakout, the price should quickly reverse direction.
   
4. Execute the Trade: Traders typically enter the market after confirming the SFP.
   

🟣Examples

Bullish Example: Bitcoin breaks below a $30,000 support level, drops to $29,000, but closes above $30,000 by the end of the day, signaling a Real Bullish SFP.




Bearish Example: Ethereum surpasses a $2,000 resistance level, rises to $2,100, but then falls back below $2,000, forming a Bearish SFP.




🟣Pros and Cons of SFP

Pros:
Effective in identifying strong reversal points.
Offers a favorable risk-to-reward ratio.
Applicable across different timeframes.

Cons:
Requires experience and deep market understanding.
Risk of encountering false breakouts.
Should be combined with other technical tools for optimal effectiveness.



🔵Settings

🟣Logical settings

Swing period: You can set the swing detection period.
SFP Type: Choose between "All", "Real" and "Considerable" modes to identify the swing failure pattern.
Max Swing Back Method: It is in two modes "All" and "Custom". If it is in "All" mode, it will check all swings, and if it is in "Custom" mode, it will check the swings to the extent you determine.
Max Swing Back: You can set the number of swings that will go back for checking.

🟣Display settings

Displaying or not displaying swings and setting the color of labels and lines.

🟣Alert Settings

Alert SFP: Enables alerts for Swing Failure Pattern.
Message Frequency: Determines the frequency of alerts. Options include 'All' (every function call), 'Once Per Bar' (first call within the bar), and 'Once Per Bar Close' (final script execution of the real-time bar). Default is 'Once per Bar'.
Show Alert Time by Time Zone: Configures the time zone for alert messages. Default is 'UTC'.



🔵Conclusion

The Swing Failure Pattern (SFP), or False Breakout, is an essential analytical tool that assists traders in identifying key market reversal points for successful trading.

By understanding the nuances between Real SFP and Considerable SFP, and integrating this pattern with other technical analysis tools, traders can make more informed decisions and better manage their trading risks.