Price Action Failure Indicator

When price tells us that the market has failed to do something.


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APA Price Action Failure Overview

See Trade Entry Setups and Market Direction!

  • Price Action Failure occurs when price shows us that it has failed to break a pivot point (swing point) such as a “Higher High” or a “Lower Low”.
  • This happens by means of a price action movement that violates continuation of the current price direction.

How Does It Work?

  • The structure is based on pivot points creation, and begins by identifying a new high or low.
  • PAF entails a potential pivot point and then the maximum distance away from the potential pivot which, we will call the proximal line before price retests the extreme.
  • We will also call this proximal line a line in the "sand." When price closes beyond proximal line then we can say price has failed to do something and has made a market event.
  • When using the PAF indicator, we will see a red line or green line automatically appear to represent when and where price has rejected a pivot.

How  This Helps You

As price consolidates between this pivot and the proximal line please expect price to retest this level for 3 reasons.

  • First, in Sine wave analysis we always see retests of extremes as peak point. This pattern is based off trying to categorize and simplify that pattern as it happens in the markets.
  • Secondly, it retests the pivot to see where buyers or sellers are.
  • Third, we expect to see a retest of this area because it tends to be a place of consolidation. As the two market conditions of consolidation and expansion play out, price bounces back and forth between consolidation and expansion as the trend develops. This is always how we can more simply define ‘pullbacks’

Perhaps the most simple price action pattern is based on Sine patterns of one dimensional waves.  We can easily and simply use this pattern in the markets to capitalize on trend following setups. It is assumed that as we use this pattern we will expect to see a retest of this area because of wave theory.

The Advantage

  • Because this pattern is based more on wave theory of a sine wave moving up and down, we can expect that many don’t understand this pattern and will get stopped out on the retest of these areas. i.e., dumb money, retail traders, non-institutional traders.
  • Therefore, if we are using a PAF to enter, expect to get a quick first target and a retest of your entry.
  • This retest should be quick as many retail traders have moved their stop losses to break even +1 or +2 and that stop sweep should be quick.
  • Make sure you provide enough space with your stop loss so that this you do not get stopped out just to see price move in the trend direction as predicted.
  • There should be only one retest of this area as price should pick up momentum after the retest (stop sweep has happened).
  • If it does not, then you are probably not where you think you are in the market cycle and need to re-assess, or timing of the big move hasn’t fully matured yet.

We recommend using this approach in all trend following systems.  The APA Elite will give you the definition of trend if you are not currently able to define it.  By using this approach we keep it simple, and while wave theory may be complex, we are using the base derivative for optimal trend trading advantages

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