Failure to Continue

There is too much of confusion among the readers about FTC (Failure to Continue). I will try to explain it further. FTC is not really a pattern in the true sense. We are basically trading three patterns at Decision Points namely TST, BOF and BPB. FTC can either be a TST or BOF but never a BPB. Further it can be a failure to test a new price extreme.

There are two types of Decision Points. Fixed levels and Dynamic levels. Fixed ones are levels like PDC,PDH,PDL,DO,BRN etc. These levels will not change. Dynamic levels are levels created by the market during the current session. Market will be creating new DPs and discarding the old ones all the time. Examples are HOD,LOD, MSP and range extremes.

Usually we trade established levels where market reacted earlier. Sometimes market will establish a fresh extreme and change direction from there either to change trend or to establish a new range. FTC is an effort to capture such trades. FTC trades are always counter trend trades and hence relatively high risk trades. Basically we are trying to identify trader exhaustion either on the long side or on the short side.

Look at Pic 1. Price is in a momentum move. It breaks a DP and moves up further to stall at a certain level. We feel that buyers are exhausted and market may consolidate. We look for FTC here. We keenly observe what price is doing. FTC can occur in 3 ways explained as A,B and C. These are failure to test the extreme, BOF of extreme and TST of the extreme. Price may reverse or consolidate. Most probably we can expect a range here. Lower boundary of the range can be the DP, Flip or MSP.

FTC is very useful in managing the trades. Look at Pic 2.We enter on the BOF of a range low at A. Price moves up breaking the range high and stalls at a certain point called B.. An FTC at point B is a signal to book our profits. Here price may consolidate for a long period in a new range. It is better to capture most of the move by exiting at B on  FTC and wait for the next signal to act.

I have given only the long example. It is applicable on short side also.Be very careful while initiating new trades at FTC. Ensure that there is clear exhaustion of momentum price move.If you are in doubt, better to stay out. Hope it is clear. Otherwise let me know.