Swing failure pattern in gold trading
A swing failure pattern (SFP) is when gold trades beyond a prior swing high or low but closes back inside it, signaling a failed breakout and possible reversal.
Also called SFP, Failed swing, Swing failure
A swing failure pattern (SFP) occurs when price takes out a previous swing high (or low) intraperiod but the candle closes back on the other side of that swing. The wick shows that orders beyond the swing were triggered, but the market could not hold there. It is a precise, candle-based way to describe a liquidity sweep or turtle soup.
How it applies to gold trading
Gold’s swings are full of stops, and SFPs appear often at previous day highs and lows, session highs and equal highs or lows. The basic trade is to enter against the sweep after the SFP candle closes, with a stop beyond its wick. Some traders add confirmation from momentum divergence or a lower-timeframe structure break.
The timeframe of the swing matters. An SFP of a daily swing high on the 4-hour chart is more significant than a 1-minute SFP of a minor swing.
Worked example
Example (hypothetical numbers): the last 4-hour swing high is 4,052. A 1-hour candle rises to 4,058 and closes at 4,047. That is an SFP. A trader sells at 4,046 with a stop at 4,061 ($15) and targets 4,015, the last swing low, for about 2R.
A common mistake
Entering before the candle closes. A swing break can look like a failure halfway through the candle and close as a breakout.
See also: Liquidity sweep, Turtle soup, Swing high and swing low, Pin bar.
Frequently asked questions
What is an SFP in trading?
A swing failure pattern, when price trades past a prior swing high or low but closes back inside, suggesting a failed breakout.
Is an SFP the same as a liquidity sweep?
It is a candle-based definition of one. The sweep is the run of stops; the SFP is the close back inside that confirms it failed.
Where should the stop go on an SFP trade?
Beyond the wick of the SFP candle, with a small buffer for spread.