Swing Failure Patterns | InvrsROBINHOOD

A Swing Failure Pattern is a powerful price action signal that suggests a "liquidity grab" or "stop hunt." The indicator identifies two types of SFPs:

🐻 Bearish SFP (Red Label): This occurs when the price pushes above a prior swing high but then closes back below it. This failure to hold higher prices indicates that buyers have lost control, and the move was likely designed to trigger the stop-loss orders of short-sellers. It signals a potential move lower.

🐂 Bullish SFP (Green Label): This occurs when the price pushes below a prior swing low but then closes back above it. This failure to hold lower prices suggests that sellers have been exhausted, and the move was likely a hunt for the stops of long-position holders. It signals a potential move higher.

The indicator works by first detecting significant swing points based on user-defined Pivot Left Bars and Pivot Right Bars settings. It then watches for the price to sweep past one of these pivots and close back on the opposite side, at which point it draws a clear label on the chart.

How to Use It in Trading
Traders can use the SFP indicator as a high-probability setup for entering trades, especially when combined with other forms of analysis.

1. Reversal Entries
The most direct use of the indicator is to signal trade entries.

When a red "SFP" label appears above a candle, it can be used as a signal to enter a short (sell) position. A logical place for a stop-loss would be just above the high of that SFP candle.

When a green "SFP" label appears below a candle, it can be used as a signal to enter a long (buy) position. A logical stop-loss would be placed just below the low of the SFP candle.

2. Confirmation and Confluence
SFPs are most powerful when they form at significant locations on the chart. Do not trade every signal in isolation. Instead, look for confluence, where the SFP confirms another trading thesis. For example, a bearish SFP is much more reliable if it occurs at:

A major resistance level.

A key Fibonacci retracement level (e.g., the 61.8% or 78.6% level).

The upper boundary of a trading range or channel.

In alignment with a higher timeframe downtrend.

3. Defined Risk Management
A key advantage of the SFP pattern is that it provides a very clear and objective level to define your risk. The high or low of the candle that created the pattern serves as a natural invalidation point for the trade idea, allowing for tight and effective stop-loss placement.