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Understanding Failure Break Structures in Trading

Oct 28, 2024

Failure Break Structure: Key Concepts and Examples

Introduction

  • Discussion on failure breaker structure (FBS) in trading.
  • Emphasis on raw, unscripted knowledge sharing.

Key Concepts

Order Flow

  • Bullish Order Flow: New highs with respect to demand.
  • Bearish Order Flow: New lows with respect to supply.
  • FBS involves a transition from a regular break of structure to a failed one.

Breaker Structure

  • Regular Break Structure: New low/high based on price action.
  • Fail Break Structure: When the expected structure break doesn't lead to continuation in that direction.

Demand and Supply Zones

  • Respecting demand leads to bullish order flow.
  • A failed break structure respects the original demand, turning failed attempts into liquidity.

Example

  • 30-minute breaker structure: New high indicates bullish flow.
  • Failure Break Example: Price respects a demand zone instead of creating a new low, indicating a failed break structure.
  • Refinements from the body lower parts of the candle are effective as they remain unmitigated.
  • High Probability Demand Zone: Engulfing candle increases probability.

Trading Strategy

Confirmation

  • Confirmation could be through time-based (1s, 3s, etc.) or candle-based signals.
  • Importance of meeting specific criteria for confirmations.

Continuation vs Reversal

  • Misinterpretation can lead to losses.
  • FBS can lead to continued bullish trends despite initial bearish breaks.

Entry Model

  • Develop entry models around understanding of fail break structures.
  • Importance of marking out demand zones that meet criteria.

Practical Tips

  • Market Structure: Always mark out structure.
  • Inducement and Liquidity: Identify potential for FBS through inducement layers.
  • Adaptability: Recognize different variations and not be locked into one model.
  • Fractality of Price: Concepts apply across multiple timeframes (1m, 15m, daily, etc.).

Conclusion

  • Fail Break Structures aren't frequent but can be crucial for strategy.
  • Understanding and recognizing them adds to trading arsenal.
  • Emphasizes adaptability and preparation for diverse market conditions.

Final Remarks

  • Price movement is fractal.
  • Encourages experimenting and adapting based on what works for you.
  • Importance of a multi-dimensional approach in trading.

Happy Easter and enjoy the rest of your day! Peace.

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