Description

"Swing Failure Pattern", also known as a "failure swing", is a technical analysis chart pattern used in trading and investing to identify potentially profitable entry and exit points. It is designed to help traders identify a potential trend reversal, based on the formation of a series of higher highs and higher lows.

The swing failure pattern is a short-term pattern, and is typically used to anticipate a potential trend reversal before it actually occurs. It is comprised of three parts: the first swing, the second swing, and the failure swing.

The first swing is the initial price move up or down. This swing is followed by a pullback, which is the second swing. This second swing is a pullback or retracement of the initial move, and it generally occurs in the opposite direction of the initial move.

The third and final part of the pattern is the failure swing. This is the point at which the second swing fails to exceed the high or low of the first swing. This is a sign that the initial move is likely to reverse and the trend is likely to reverse.

This pattern is considered a reliable indicator of a potential trend reversal. However, it is important to note that this pattern is not infallible, and there is no guarantee that a trend reversal will occur.

In order to properly use the swing failure pattern, it is important to look for other signs of a potential trend reversal. Other signs of a potential trend reversal include divergences between the price and a technical indicator such as a moving average or a momentum indicator, or a break of a key support or resistance level.

If a swing failure pattern is observed along with other signs of a potential trend reversal, the trader may decide to enter a trade in the opposite direction of the initial move.

The swing failure pattern is a versatile tool that can be used across multiple time frames and markets. It is particularly useful in markets that are trending, since it helps to identify potential trend reversals.

It is important to note that the swing failure pattern is best used in conjunction with other indicators and strategies. This will help to ensure that the trader is making informed and profitable decisions.