Swing Failure Pattern (SFP)

A Swing Failure Pattern (SFP) in cryptocurrency trading refers to a technical analysis pattern that occurs when a price briefly moves beyond a significant swing high or swing low, only to swiftly reverse direction, failing to sustain the breakout. It is also known as a 'Stop Hunt' or 'Trap'.

Here's how it works:

1. Identification: Traders identify a significant swing high or swing low on a price chart, which represents a key level of support or resistance.
2. Breakout: The price appears to break out above a swing high or below a swing low, indicating a potential trend continuation.
3. False Breakout: However, instead of continuing in the direction of the breakout, the price quickly reverses, trapping traders who entered positions based on the breakout.
4. Reversal: The reversal often occurs swiftly, leading to a sharp move in the opposite direction of the breakout.

Examples:

- Bitcoin SFP: Bitcoin's price briefly spikes above a key resistance level at $50,000, triggering buy orders from traders anticipating a bullish continuation. However, the price quickly reverses, falling back below $50,000, trapping buyers and leading to a rapid decline.

- Ethereum SFP: Ethereum's price drops below a significant support level at $3,000, prompting traders to sell short in anticipation of a downtrend. Suddenly, the price reverses, surging back above $3,000, trapping short sellers and resulting in a rapid upward movement.

Cases:

- March 2021 Bitcoin SFP: In March 2021, Bitcoin experienced a Swing Failure Pattern when its price briefly broke below the $50,000 support level, triggering stop-loss orders from traders. However, the price quickly rebounded above $50,000, trapping sellers and leading to a rapid upward movement.

- July 2022 Ethereum SFP: Ethereum encountered a Swing Failure Pattern in July 2022 when it briefly broke above the $3,500 resistance level. Many traders entered long positions expecting a bullish continuation, but the price swiftly reversed, falling back below $3,500 and catching buyers off guard.