FTR http://readthemarket.com/index.php/forum/trad http://readthemarket .com/index.php/forum/trading-articles-discussions/1976-ftr?limitstar ing-articles-discussions/1976-ftr?limitstart=0 t=0 1. Introduction Before sol!ing the pu""le of price action and #efore #eing a#le to read it successfull$% one must disco!er and understand the indi!idual pieces the pu""le is made of. &fter all% e!er$ e$e-catching #uilding is made of indi!idual #ricks and stones. 'or most of us at ()*% the #eaut$ of price action is +ust as stunning a structure as the cathedral of ,hartres or agrada 'amilia in Barcelona. )he onl$ difference is that #ricks and stones of real #uildings are represented #$ price caps% ')(s% engulfs% fakeouts% uasimodos% diamonds etc. f the #uilding #locks of the price structure nothing is more important than engulfs and ')(s n m$ article am going to explain one of the t2o most important pieces of price action 3 ')(. )ogether )ogether 2e 2ill explore 2hat is looks like% 2here it can #e found and 2hat is its role in the structure of price action. ')( must #e learned properl$ #efore one can ad!ance further. 4lease take $our time% don5t rush learning price action is an ama"ing +ourne$% so en+o$ it. 2. What is FTR? o% 2hat actuall$ is ')(? ')( means 'ailure to (eturn5. But 2ait8 ho 2ants to return? here do the$ 2ant to return? &nd 2h$ on earth do the$ fail? )hese three important uestions must #e ans2ered% so let5s do i t. t5s a 2ell kno2n fact that price% once it reaches a certain #arrier% either #ounces #ounces of it or #reaks it. nce it #reaks it% t2o possi#le scenarios occur: it either returns #ack #elo2/a#o!e the #arrier and goes on in the direction against the #reak or fails to return and keeps going in the direction of the #reak. n the latter scenario% a ')( is made. &&; &&; &nd it is of !ital importance to #e a#le to identif$ it
h$? ell% there is such a strong #u$ing or selling pressure aka s uppl$ / demand at the ')( that the price +ust cannot return% it must go on in the direction of the #reak. o2 let5s take a look at the anatom$ of ')(s. n the follo2ing picture $ou can see a diagram sho2ing some #asic !ariations of ')(s. ook at them carefull$% $ou 2ill see that the$ ma$ look a #it different #ut remem#er: the$ are a#solutel$ the same in terms of the structure.
)he red line a@ represents a #arrier. t can #e a A44() / ()&>,% ()&>,% a ')( in opposite direction 2ill #e explained later@ or limit of a 4&C 4&C 4rice &ction Cone@. 4rice action #reaks the #arrier 1@ and retraces D@. t is irrele!ant 2hether price action crosses the #arrier again or not as in examples ii and i! a#o!e@. &t the extreme of the retrace a #ase is !er$ often made #@. )hen% price action continues in the direction of the #reak E@. ')( is confirmed after price action #reaks the high / lo2 c@ 2hich formed after the #reak of the #arrier. nl$ after the #reak of c@ 2e can sa$ that price action indeed failed to return. >o2% 2hen the ')( is confirmed% 2e dra2 a rectangle at the #ase #@ and protract it to the right. o2 that 2e ha!e studied the diagrams a#o!e% 2e can look at real life examples of ')(s.
3. FTR after the break of SUPPORT / RSIST!"#
')(s after the #reak of support / resistance are !er$ common. )he$ are simpl$ e!er$2here in the chart and $ou 2ill learn to spot them. ;ou ;ou certainl$ kno2 that there are ma+or support resistance lines as 2ell as minor ones8 the more important the /( line is% the more significance 2e must assign to the ')( that follo2s.
$a%or S/R &ine k% let5s start 2ith the ma+or ones. assume that $ou alread$ kno2 ho2 to distinguish a ma+or ( from minor (... n the follo2ing chart $ou can see the #ro2n ()&>, ()&>, line. )he ()&>, ()&>, is a ma+or one% it has #een respected man$ times in the past not +ust those t2o touches seen in the picture@. uddenl$% the ( line is #roken. s it +ust a fakeout or genuine #reak? o2 it5s going to #e interesting interesting uch ')( is an ama"ing place to trade on the first !isit. )he first !isit occurred in approximatel$ one 2eek. &nd look at the reaction )he first !isit to an ')( is called ')B 'irst )ime Back@.
>o2 open $our trading platform or 'orex )ester )ester and see for $ourself ho2 often this 2orks $inor S/R &ine t5s important to kno2 that the ')(s in the a#o!e three charts are actuall$ not the onl$ ')(s that can #e spotted. 'ar from it !er$ time price #reaks a minor support/resistance% fails to return and goes on% a ne2 ')( is made
n real life% ho2e!er% the chart seldom looks so neat and clean as in the a#o!e diagram. n the follo2ing chart $ou can see the a#o!e principle in a real chart in a do2n trend@.
4lease take $our time and stud$ the a#o!e chart% $ou ma$ notice that ha!en5t marked a#solutel$ & ')(s #ecause the chart 2ould #e !er$ mess$. pen a chart in $our platform and mark all ')(s. 4ractise *ark a s2ing high/lo2% find 2here it 2as engulfed% then find the ')(. (epeat 2ith next high/lo2. (emem#er% the the purpose of the article is not to tell $ou that each and e!er$ ')( is trada#le #ut to teach $ou ho2 to s pot ')(s and ho2 to mark them. et me repeat: it is of paramount importance
'. FTR after the break of a FTR in o((osite direction ')(s are formed after engulfing of a #arrier. e alread$ kno2 this. ne of such #arriers is an ')( in opposite direction. ook at the diagram #elo2% think it is self-explanator$. self-explanator$. ')( d is engulfed and ')( 1 i s made% and so on.
&nd a real life example.
). FTR after the break of a P!* &i+it )he limit of a 4&C is another #arrier% the #reak of 2hich results in extremel$ important ')(s )his is% ho2e!er% rather rather ad!anced and it goes #e$ond the scope of this article on the ')( #asics.
,. #onc&usion n m$ article tried to introduce a !er$ important #uilding #lock of price structure 3 ')(. e ha!e learned that ')(s are formed after the #reak of a price #arrier. t is important to realise that ')(s are places 2here institutional traders open / close their positions. )his makes them ideal places for looking for trade setups or targets.
esI4aul cico wrote:
sorry Les Paul i have a question. which is the difference between a suuply/demand level and a Ftr because in S/D level too the price price could be broken in a strong way against a important barrier. barrier. when when i draw them i don t see the diffrence. diffrence. thanks a lot Dear cico if price breaks something and fails to return it!s simply F"# which is at the same time S$PPL% / D&'()D level
Hi Nego, I am seeing great progression here.... Excellent - keep up the good work. -- 1. You have studied the F! pattern and understand what an F! is. -- ". You have discovered that F!s are ever#where #ou look, on ever# time $rame. -- %. You have discovered in &ack testing that not all F!s are trada&le on return. -- '. No dou&t #ou are a&out to discover that its not (ust the potential trade $rom an F! that is important, it is e)uall# important, i$ not more important what i t means when a F! &reaks * $ails. Ever# F! holds some signi+cance, &ut where the# $orm is important and understanding the context o$ &igger picture is critical. lso, never $orget IFs golden rule - /nl# rade $rom the Edge. I$ #ou keep pushing, #ou will get there. s a suggestion, #ou could tr# this.... First, read m# post here here.. Its not a&out t he F!, &ut applies e)uall# to #our stud# on F!s. hen, -- 1. !ead the F! 0arketpedia article again. I read the articles over and over at dierent times. 2ometimes #ou see something which did not click in a previous read o$ the article. -- ". !ead 3es45auls 6ournal, speci+call# when he starts talking a&out his 2weet F!. -- %. !ead 5edinis 6orunal, speci+call# when he starts talki ng a&out the &reak o$ an F!. -- '. !ead the F! 0arketpedia article again.
--7. 2tud# #our charts again. -- 8. 5ost &ack here in the thread what #ou learnt. madwt
"he *uasimodo is a b eautiful and powerful Price (ction structure. +t gives a big sign that the big money is ready to change price direction. +t often serves to trick the uninitiated into giving up good positions to them allowing them to get big orders filled. ,e look for them at areas of Supply and Demand where we look for all our trades and use them as confirmation confirmation that that price has turned due to the engulf that that occurs in their formation
