FTR (Failure To Return) is a price action pattern that indicates a trend continuation. This guide will teach you how to trade FTR patterns with examples for bearish and bullish cases. You will learn how to catch big moves, make profits, and avoid mistakes. Ready to master FTR patterns? Let’s go!
Key Point
Summary
What are FTR Patterns?
Failed breakouts that reverse back into prior trading ranges. Also called false breakouts.
How to Identify FTRs
Look for breaks of support/resistance that fail to hold and move back inside prior structure.
Types of FTRs
Bullish FTR forms after failed breakdown. Bearish FTR follows failed breakout up.
How to Trade FTRs
Sell highs of bullish FTRs. Buy lows of bearish FTRs. Place protective stops.
Using FTRs
Signal loss of momentum and potential reversals. Provide defined trade entries and stops.
Limitations
Not all FTRs fully reverse the prior trend. Can be tricky to trade in real-time.
Learn the key points of the FTR Patterns from this table and how it can help you trade better.
What is the FTR (Failure to Return) Trade Strategy?
FTR means Failed to Return, a trend continuation pattern. It occurs when the price moves sharply away from a specific level, leading to an imbalance marked by two or three powerful candles. Then, the price pauses and forms some consolidation candles, which are the FTR candles.
After that, the price resumes its direction and leaves another imbalance with strong candles. Therefore, to identify this pattern, we need to see imbalances before and after the consolidation.
However, before we look for the pattern, we need to understand how trends work. Trends start with strength, take a break, and then regain their strength. This pattern happens during the “break” phase of a trend.
When the price is going up, the first red candle after the BOS breakout acts as a resistance level. There might be several red candles, but the most significant one is the solo one.
Similarly, when the price is going down, the first green candle after the BOS breakout acts as a support level.
There might be several green candles, but the most significant one is the solo one. Place this candle(s) in a box. This is a potential demand/supply area in the future.
When we draw a box around the Failure To Return zone, we should include the candle bodies but also the wicks.
When the FTR concept occurs, a supply or demand zone also occurs. The first time the price comes back to this zone, we anticipate a strong reaction from the market.
This is known as FTB, or First Time Back. These terms may sound different, but they are all based on the same principle of supply and demand.
Types of FTR:
It has two types: Bullish and Bearish.
The Bullish FTR:
The price is in an uptrend, making higher highs (HH). When each HH breaks, BOS (break of structure) is formed. The first obstactle that the price meets after the BOS, which is the consolidation zone, is marked by the red candles here.
This area has a high chance of becoming a demand zone for us in the future.
The Bearish FTR:
The price is in a downtrend, making lower lows (LL). When each LL breaks, BOS (break of structure) is formed. The first obstactle that the price meets after the BOS, which is the consolidation zone, is marked by the green candles here.
This area has a high chance of becoming a supply zone for us in the future.
How to Trade Using the FTR Strategy?
There are 3 different trading strategies:
High-risk trade: There should be a momentum candle after Failure To Return. We can enter a trade right after the momentum candle closes. We need to make sure that it allows us to enter with a suitable risk-reward ratio. The stop should not be too tight or too loose.
Moderate-risk trade: The imbalance candle that comes after the Failure To Return closes, and the next candle might test the level with a wick. This is a moderate-risk option. Sometimes there might be a wick test, sometimes there might not be. There is no certain way to test the level.
Low-risk trade: After the Failure To Return forms, the supply/demand zone that it creates gives us a chance to enter. We can act based on how the price reacts in this zone.
How to trade Ftr supply zone in forex?How to trade FTR Demand Zone?
Stop-Loss (SL):It is below or above FTR zone. But sometimes the price might want to sweep the it’s liquidity and keep moving. In this case, we need to protect our trade by checking the lower time frame. The breakouts here are crucial.
Take-Profit (TP): A nearby swing point, supply/demand zone, or a liquidity sweep in the chart.
Learn the concept with examples from this video that are straightforward and understandable.
Profitable Examples of the Failure to Return:
FTR Demand Zone Trading ExampleFTR Supply Zone Trading Example
Top 6 Tips for Trading the FTR:
Understand liquidity and how it can affect your trades. A liquidity sweep can reverse the price movement and stop you out of your position, so you need to be aware of the liquidity levels in the market.
Use your preferred timeframe, but make sure you can see the trend clearly. This pattern can occur on any timeframe, but you need to follow the trend and look for that align with it.
Trade the strongest Failure To Returns, which are usually formed by a single candle. A single candle indicates a strong imbalance and momentum in the market, and it has a higher chance of working out than multiple candles.
Also, FTRs formed between momentum candles are a higher chance of Supply Demand flip zone in the future.
Pay attention to the wicks of the this candlesticks, as they can show you where the supply and demand zones are.
Fresh zones, which are the ones that have not been tested or touched by the price before, are more valuable. Old zones lose their effectiveness over time, as their supply and demand zones get consumed by the market.
Keep a close eye on news and events that can impact the market. Political developments, economic indicators, and global events can significantly affect prices. Staying informed will help you react swiftly to market changes.
Common Misconceptions When Trading with FTR:
It always works as a reversal pattern.
This is not true, as it is mainly a continuation pattern that shows the strength of the trend.
This pattern is only valid on higher timeframes.
No, as it can occur on any timeframe, as long as there is a clear trend and an imbalance in the market. However, higher timeframes tend to have more reliable breakouts than lower timeframes, which can have more noise and false signals.
Failure to Return always works on the First Time Back (FTB).
Contrary to that belief, as sometimes it can fail on the first time back (FTB), which means that the price does not respect the zone and breaks through it. This can happen when there is a change in the market sentiment or direction, or when there is a strong counter-trend force. Therefore, traders should always use stop-loss orders to protect their trades and exit when the zone is invalidated.
It’s risk-free trading.
However, the facts suggest otherwise. Traders should always be flexible and adaptable when trading with any concept and learn from their own experience and observations.
In this concluding chapter, let’s consolidate our understanding of it’s role in price action trading. We have cleared the common myths, explored the different methods, and stressed the importance of risk management. Now, it’s your turn.
Practice this pattern and evaluate your performance. Ask yourself these questions: Where do you make errors, which timeframe works best for you, how do you control your emotions in trading, what is your success rate? Validate your practice with Excel by answering all these questions.
keep a trading excel journal
The key is simple: Learn the concept, do a backtest and record the results in detail in Excel. So, equip yourself with knowledge, adaptability, and an unwavering commitment to thrive in this new era of trading.
FAQs:
Are there specific currency pairs where this strategy is more effective?
It can be applied to any currency pair, but its effectiveness may vary depending on market conditions and trends. Our main ally is a strong trend. There should be a clear directional bias.
What is the difference between FTR and FTB?
FTR stands for Fail To Return. FTB stands for First Time Back, which is the retest of the FTR zone by the price. FTB can offer another trading opportunity if the price respects that zone. Don’t worry about the names, you can give your own name too.
The important thing is to understand the concept. If you have already noticed, there is some confusion about the name. Some traders call it “Failed to Return”, some call it “Failure to Return”, and some call it “Fail to Return”.
How to avoid fake or false Failure to Return patterns?
Use stop-loss orders to protect their trades and exit when the zone is broken by the price.
Use multiple timeframes to confirm the validity and significance of the pattern.
Use risk management and position size calculators to determine optimal entry and exit points.
How do I determine the ideal timeframes for this strategy?
The choice of timeframe depends on your trading goals; shorter timeframes for day trading and longer ones for swing trading.
How to manage emotions and psychology when trading with these patterns?
Use trading plans and rules to define their entry and exit criteria, risk-reward ratio, position size, and stop-loss orders when trading with it.
Use journaling or review sessions to analyze their strengths and weaknesses when trading with this pattern and learn from your mistakes.
Use meditation, relaxation, or visualization techniques to calm their mind and body before, during, and after trading with these patterns.
Brian Miller is a Forex trader who uses price action, a method based on real prices instead of indicators. He learned this technique from hedge fund experts and has been trading full-time since 2011. He has a finance degree and writes about Forex on various websites. On this website, he shows his price action system and how it works in different markets.
