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What is a Failure Swing?
This indicator movement is seen around overbought or oversold levels. It indicates if a trend is getting weaker or is going to reverse soon. These signals can also help to help evaluate other signals. And looks the same as a trend reversal on a price chart.
A failure swing in an up trend
A low (trough) below the oversold level,
followed by a peak that does not cross the overbought level,
and a second low (trough) that is higher than the previous one.
If the indicator rises above the high (peak) created by the indicator between the two low points, then this is a Failure Swing.
A failure swing in a down trend
A high (peak) above the overbought level,
followed by a trough that does not cross the oversold level,
and a second high (peak) that is lower than the previous one.
If the indicator falls below the low (trough) created by the indicator between the two high points, then this is a Failure Swing.
These signals are the strongest when the second peak or trough is between the overbought and oversold levels.
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Risk Disclosure: Trading foreign exchange on margin carries a high level of risk, and may not be suitable for all investors. The high degree of leverage can work against you as well as for you. Before deciding to invest in foreign exchange you should carefully consider your investment objectives, level of experience, and risk appetite. The possibility exists that you could sustain a loss of some or all of your initial investment and therefore you should not invest money that you cannot afford to lose. You should be aware of all the risks associated with foreign exchange trading, and seek advice from an independent financial advisor if you have any doubts.