What Is a Swing Failure Pattern (SFP)?
A Swing Failure Pattern (SFP) is a technical analysis tool used to identify potential reversals in the price of an asset. It is based on the idea that when prices move up or down, they tend to do so in waves, and these waves can be identified by looking at past price movements. The SFP looks for patterns where there are two consecutive swings with similar size and direction followed by a third swing which fails to reach the same level as its predecessors. This failure indicates that momentum has shifted and could signal a reversal in trend.
The SFP can be applied to any type of chart including line charts, bar charts, candlestick charts etc., but it works best when used on daily or weekly time frames since this allows more data points for analysis. Traders use this pattern as an indication of possible entry or exit points from trades depending on whether they believe the market will reverse after seeing such a pattern form. Additionally, traders may also look out for other indicators such as volume changes or moving averages which could confirm their suspicions about a potential reversal before entering into any positions related to it.