FTR in forex trading refers to the fail to return in the price action. It is the failure of the price to return to a specific level after the breakout. It is named FTR or fail to return in technical analysis.
In this article, you’ll learn about FTR trading, all types of FTR and FTB in forex. These are the most basic supply and demand terms, and advanced traders use these strategies to do technical analysis of a certain asset.
How to identify FTR in forex trading?
In the price action, when the price breaks a certain key level or support resistance level, it will either bounce from that level or break that level. It all depends on the market decision. We’ll also use the FTR strategy to identify the decision of the market so we can trade with them.
So, if the market breaks a level and returns without any further trend continuation, the price has given a bounce from the key level. And a trend reversal happens.
On the other hand, if the price breaks a certain level and then does not return but continues its trend after a minor pause, then it means an FTR has been formed
This is the most simplistic way to identify FTR on the chart. Look at the image for a better understanding of this price action pattern.
Types of FTR in trading
Four types of fail to return patterns can form on the candlestick chart.
FTR Type 1
The price breaks a resistance level in the first type and makes a base region after the resistance breakout. Then the price will continue its bullish trend.
The base region will act as an FTR zone.
FTR type 2
The price returns within the resistance level after the breakout in this type. Then it forms a base region, and again the price will continue its bullish trend breaking the resistance level.
The zone will be the FTR zone.
Look at the image below for a better understanding of this price pattern
FTR type 3
It is a bearish trading pattern. When the price breaks the support zone, then after a base formation price will continue its bearish trend. Price fails to return, and the bearish trend continues.
Then this base zone will act as an FTR zone
FTR type 4
The price returns inward to the support zone during this pattern after the breakout. Then again, the price will break the support zone and continue its bearish trend.
During the breakout, the formation of the base region will act as the FTR region.
Look at the image below for a better understanding of this pattern.
How to draw the FTR zone correctly?
After learning the concept of FTR, the next step is to draw the FTR zone correctly. The base region of the FTR shows us the limits of FTR.
For example, a minor pause in the price trend will happen whenever the price breaks the support or resistance zone. This pause makes a ranging price structure. It is also called the base region.
To draw the FTR zone, we will pick the high and low prices of the base region in each type of FTR on the chart. Like in the image below.
I will also recommend learning about supply and demand trading posts to learn more about drawing zones.
What does the FTR in forex tell traders?
The main purpose of the FTR in trading is to reveal the footprints of big institutions and big traders. It shows the price levels where big players place their pending buy or pending sell orders. By determining the future steps of big players, we can trade with the big banks to generate some profits.
This is the price action technique to trade with the trend or trade with big banks.
also, learn about the Flag Limit in price action
How to trade FTR in forex?
Trading FTR is very simple. You will need to practice drawing and identifying FTR zones correctly. Otherwise, a wrong trading method will lead to time waste and losses.
Buy pending orders
If a type of FTR forms after the break of the resistance zone, it gives rise to the formation of an FTR zone. And this FTR zone will represent the presence of buy pending orders. Institutional traders and banks will place their pending buy orders at this FTR zone.
Pending buy orders will be filled when the price returns to the FTR zone, and a new bullish trend will start again.
Sell pending orders
If a type of FTR forms after the break of the support zone, it gives rise to the formation of an FTR zone that will have pending sell orders. Big traders and institutions place their pending sell orders at this FTR zone. During the FTB1 (first time back), the pending sell orders are filled, and a new bearish trend starts.
Fail to return trading example
In this example, check the working method of FTR in trading. Check the image below and analyze the price. Like how price has given a minor pause after a break of the previous swing level.
The base or Doji candlestick formation at the resistance level in the example below shows the FTR region in that area. You will get more details if you switch to a lower timeframe.
After FTR formation, the price continues its bullish trend. Now, when the first time back phenomenon happens, price filled the pending buy orders of institutions and continued its bullish trend.
The best trading strategy is the one that trades with the trend. Because if you open trades against big institutions and big market giants, you will always lose. A retail trader can not compete with forex market giants.
So, if you want to make some profits in this market, then try to predict the next moves of big institutions. In this way, you will trade with them. This is the best price action trading strategy.
It would be best if you would backtest the fail to return (FTR) price pattern properly before using it on a live account.