ICT Failure Swings: Reading an Untaken High or Low

A lower high forms two pips short of a line, then EUR/USD falls sharply. It is common to hear that the market swept the high. Yet the high was never reached. Losing that distinction makes a journal of liquidity raids almost impossible to interpret.

A failure swing is useful for studying what happened before a level was taken. It may suggest weakening delivery on the approach, but the unvisited extreme remains available. This lesson keeps the failed attempt separate from the later break that makes it actionable.

Definition and chart context: failed attempt at an old extreme

Start with a first swing high at 1.09483, a reaction low at 1.09276 and a second rally to 1.09462. The rally falls short by 2.1 pips. At that moment the original high remains untraded, but price can still extend upward. For this bearish study the information changes only when a completed candle closes beneath the intervening reaction low.

For the ICT background, see Institutional Market Structure. The worksheets below use stated study rules for measurement, confirmation and simulated fills. Those choices let you reproduce the examples; they are not claims that a public candle identifies the owner, size or intent of an institutional order.

Why this distinction matters

A failed approach leaves liquidity beyond the original extreme untested. That can support a reversal hypothesis when displacement appears, yet it also provides a reason the position could fail: price may return and run the intact level. The stop and destination therefore need independent justification. A lower high in a rising market can be a temporary pause rather than a change of institutional delivery.

How to identify it before the next candle

Store three points: the original extreme, the intervening reaction pivot and the candidate second extreme. Confirm the second extreme before treating it as a finished swing. Then mark the time at which price breaks the reaction pivot. If the second high merely ties the first, use a separate equal-high category. Mixing ties with clear failures and penetrations makes later comparisons meaningless.

Define equality and tolerances before opening the chart. A strict version treats a one-point shortfall as a lower high, while a data-quality filter might require a larger minimum distance. Save the numerical distance in addition to the yes-or-no label. That lets another reader reconstruct either convention without changing the recorded prices.

Short of the extreme is a distance, not yet a pattern

Write down an original high of 1.09284, a reaction low of 1.09127 and a second confirmed high of 1.09261. The second high falls short by 2.3 pips. A later close at 1.09112 breaks the reaction low. Now replace only the second high with 1.09297: the old high was crossed by 1.3 pips, so this becomes a raid-and-return study. Replace it with 1.09284 and the result is a tie. The subsequent bearish candle can look identical in all three examples, yet the evidence available about untouched liquidity is different.

Compare failure swings with sweeps as two different populations. In a sweep the market trades to the other side of the first extreme, which this pattern expressly avoids. Pooling the two can make a reversal story sound flexible, but it removes the feature that the exercise is intended to measure.

How to trade the idea in a paper replay

For a bearish case, avoid selling merely because price is still below the first high. Every rally is below its destination before it gets there. Require the return through the reaction low, locate the displacement array, and wait for a retracement that leaves sufficient room to the next downside objective. For a bullish case, reverse the comparisons without lowering the confirmation standard.

The two replays use constructed five-minute candles and a controlled order model shared across this workbook series. Keeping the execution pattern comparable lets you isolate what the featured concept changes: the reference, the eligibility decision, or the management rule. These selected paths illustrate mechanics. They are not historical signals or a sample from which to estimate a winning percentage.

How a swing acquires a history

On a clean chart, put the letter L beside the candle where a level is located and K beside the candle where the level becomes knowable. If the drawing rule needs a later candle, those letters belong at different times. Add a third mark, A, when the trading instruction based on that information is active. One lesson of market structure is that a single horizontal line on the finished chart can conceal all three dates.

Take a five-minute bar labelled 08:15 by a platform that stamps opening times. At 08:17 you may know its running high and low so far, but the 08:20 close has not happened. A rule using completed closes could not act at 08:17 simply because the historical bar now has a closing value. A rule using a live break could act then, but it must also accept live breaks that later disappear. Those are separate policies, each with its own costs and false starts.

Next write the smallest observation that would actually change your structural label. A wick through the far end, a completed close beyond it and a second bar holding outside are not interchangeable. Requiring more evidence delays eligibility and can worsen the available price. Accepting less can introduce more failed breaks. An audit needs both the improved and the deteriorated cases before saying one rule is preferable.

Finally keep an old map when a new map replaces it. For each version record its activation time, the point it governs, the timeframe and the precise reason it stops controlling decisions. A later version can explain where the chart went without invalidating a decision that followed the map genuinely available earlier. This version history is especially useful when two traders agree on every price but disagree about when a structural change became actionable.

A shortfall that is smaller than the measurement error

A lower high one fractional point below an old high is numerically lower on one bid feed. On another broker’s feed the two highs might be equal or reversed. Neither fact automatically invalidates the setup on the feed actually used. It does mean that a claim about universal market behaviour needs stronger evidence than a marginal price difference on a single screenshot.

Use a sensitivity band for research without silently changing the definition. Save the signed distance from the second attempt to the old extreme. Apply a strict rule on one sheet and a minimum-shortfall rule on another. Cases that survive both are less sensitive to tiny quote differences. Cases that disappear are informative: they tell you how much of the apparent sample depends on the smallest visible price increments.

Now separate confirmation from distance. A generous shortfall without a closing break of the intervening reaction point remains an unconfirmed failure under this policy. A tiny shortfall followed by a strong break qualifies under the strict comparison but might be excluded by the sensitivity filter. Do not use the strength of the later break to rewrite the earlier numerical distance.

When reviewing a stopped trade, ask whether the second attempt was wrongly identified or whether a correctly identified pattern simply failed after entry. A historical sample containing only successful reversals cannot answer that question. Preserve confirmed patterns that continue in the original direction and unfinished candidates that never obtain the reaction break.

Worked replay A: The old extreme stays untouched

The first swing low is 1.09459 and the intervening reaction high is 1.09596. Watch the second attempt end at 1.09494. It falls short of the first extreme by 3.5 pips. That is the identifying feature of this example: the older low has not been swept. During the approach it is still possible for a later bar to take it.

The second attempt becomes useful to a failure-swing model only after price closes through the intervening high. Before that event a trader could describe a pause near the old extreme but not a confirmed reversal by this rule. The paper stop belongs beyond the second attempt; the old first extreme remains a separate, more distant structural reference.

Reconstruct the decision before reading the outcome

Cover the candles to the right of 07:20. On this EUR/USD bid chart the test candle opens at 1.09548, trades down to 1.09494 and ends at 1.09522. The close tells you that bids recovered part of the excursion. It does not yet tell you that anyone bought a particular number of lots, or that the prior short-term high will give way. Mark the low as an observation and leave the order field blank.

Now reveal the candle beginning 07:30. Its close at 1.09619 is above the earlier pivot at 1.09596. This is the completed break used by the exercise. Look two candles apart: the high of the bar beginning 07:25 is 1.09555 and the low of the bar beginning 07:35 is 1.09577. Their separation forms the bullish fair value gap in this model. One strong green candle alone would not establish those two outside prices.

A resting buy at their midpoint, 1.09566, can first be submitted at 07:40 under a next-bar convention. The 07:35 candle is named for its opening time, so its low cannot supply a fill for an order that depends on its close. This matters whenever the same screenshot appears to show both confirmation and a cheap entry. Write the order time before revealing the next low, not after finding a favourable one.

Assume a constant 0.6-pip spread throughout this small slice. On the return, bid reaches 1.09543 and the corresponding ask reaches 1.09549. The latter is at or below the requested buy price. We book 1.09566 as the fill, with no price improvement, no delay after activation and enough available size. Those are transparent simulation assumptions. A real candle, even from the correct side of the spread, is not a broker’s confirmation.

What the order would risk in cash

Give the practice account a USD balance of 1600. Its hypothetical cap of one half of one percent is $8.00 for this decision. For a USD-quoted pair with a 100,000-unit standard contract, one pip at one standard lot is $10. Adding 0.4 pip for assumed round-trip commission and other execution friction gives $88.00 of modelled downside at one lot. The spread is already present in the entry and exit quote rules and is not charged a second time.

Divide $8.00 by $88.00 and round down to the next permitted hundredth of a lot. That leaves 0.09 lots, risking about $7.92 under these assumptions. A gap or worse stop fill can exceed that number. Position sizing changes the money exposed; it cannot turn a missing confirmation into a valid entry. When the minimum tradable size exceeds the cap, the worksheet records a pass.

Change just one fact

Change only the second extreme to 1.09453. That new print crosses the earlier 1.09459, so a subsequent reversal could belong in a sweep study. It cannot stay in the failure-swing sample merely because the same retracement and target would follow. This one-point-of-definition test is more valuable than memorising a silhouette.

Worked replay B: The old extreme stays untouched

The first swing high is 1.27579 and the intervening reaction low is 1.27408. Watch the second attempt end at 1.27541. It falls short of the first extreme by 3.8 pips. That is the identifying feature of this example: the older high has not been swept. During the approach it is still possible for a later bar to take it.

The second attempt becomes useful to a failure-swing model only after price closes through the intervening low. Before that event a trader could describe a pause near the old extreme but not a confirmed reversal by this rule. The paper stop belongs beyond the second attempt; the old first extreme remains a separate, more distant structural reference.

Audit the short from the exit side of the quote

Read the second tape independently. The 07:25 bid high is 1.27541. By the end of the bar starting 07:35, bid has closed at 1.27383, below the pre-existing pivot at 1.27408. The workbook calls that downward displacement. It does not require a guess about which institution initiated the move. The mark is useful because a different reviewer can identify the same closing price on the same feed.

The low of the 07:30 candle is 1.27464 and the high of the 07:40 candle is 1.27432. The later high remains below the earlier low, leaving a bearish execution gap between them. Halving this interval gives 1.27448. A sell limit resting there becomes eligible only after 07:40 has finished. When bid subsequently reaches 1.27476 the paper order can fill at its stated price. No favourable slippage is credited.

It is tempting to score this short from the lowest red wick, because that is what the bid chart displays. The position actually has to buy back. With an assumed spread of 0.7 pip, an ask target at 1.27238 requires a bid at or below 1.27231. An ask stop at 1.27551 needs only a bid at or above 1.27544. Marking these two conversions before scoring prevents a one-spread error on both exits.

Keep the original order record even when the outcome is obvious from the last candle. A reviewer needs the decision price, the reference quote and the activation time, not just a screenshot captioned “short”. If the platform would have rejected a resting order this close to market, or the feed lacks quotes in the return interval, the correct response is to change the fill status. It is not to claim a market execution at the old limit price.

Score the path, then challenge the assumption

The deciding candle opens at 08:00. Its bid range is 1.27472 to 1.27559. With the assumed spread, the ask range is 1.27479 to 1.27566. The upper stop is reached before the other exit without requiring a guess about two exits inside this bar. A later movement cannot reverse a booked exit. In particular, a later visit to the original target would not repair a prior stop.

Increase the estimated round-trip friction by another half pip as a sensitivity check, while leaving entry, stop and target fills fixed. Planned risk:reward becomes 1:1.72, obtained by dividing 19.8 pips of possible net reward by 11.5 pips of downside. This answers a cost question only. If widening the actual bid/ask spread changes whether an order is triggered, reconstruct the path instead of merely reducing the result by a fee.

Change just one fact

Change only the second extreme to 1.27586. That new print crosses the earlier 1.27579, so a subsequent reversal could belong in a sweep study. It cannot stay in the failure-swing sample merely because the same retracement and target would follow. This one-point-of-definition test is more valuable than memorising a silhouette.

What can go wrong in the review?

A failure swing does not become a mitigation block merely by naming its final candle. If studying an order-block variant, define its source candle, subsequent displacement and retest separately. The existence of a failed high alone cannot authenticate every nearby candle as an institutional order.

Reader exercise: Was the second attempt measurably short?

Try the following classification without using profit or loss as a clue. Measure the distance left between second attempt and original extreme. For this worksheet, the value must be at least 0.2 pips. Also require this separate fact: a later candle closed through the intervening reaction point. These are conditions for admitting a row to a study. They do not replace the order trigger, size calculation or exit plan. The six records are constructed cases, not a report of observed market frequencies.

Cover the answer column and decide which facts you would request before admitting each record. A passes the numerical test at 0.9 pips and has the other required evidence. B has the other evidence but measures -0.3 pips. Under the stated rule that is enough to exclude B. A clean-looking reaction after B cannot change the comparison distance left between second attempt and original extreme ≥ 0.2. If you want to study a wider definition, write it as a new version and rerun every observation.

C is the deliberate boundary case. Its value of 0.2 pips equals the threshold. This worksheet uses an inclusive comparison, so C passes. A version that demands strictly more would exclude it. Keep exact prices or timestamps in the original record before rounding for display; values that look equal on a chart may still differ at the feed’s actual precision. The most efficient place to look for a disagreement between two reviewers is often an equality case like this.

D has a smaller value than allowed, so it fails even though the separate prerequisite is unknown. E demonstrates the opposite error: the measured 0.6 pips is acceptable, but the prerequisite is known to be false. F lacks the numerical evidence and its remaining condition is satisfied. There is no basis to call it either a clean pass or a measured failure. Keeping “unresolved” distinct from “no” preserves what data collection could still settle.

A generous shortfall without confirmation is still a candidate. A negative distance is a penetration and belongs to a different pattern family.

What a second reader should be able to reconstruct

Give a second reader the unannotated candles ending at the decision point, the definition used on this page and the compact evidence packet specified below. Ask for a yes, a no or insufficient evidence before giving them the rest of the chart. If they disagree, compare the raw extrema first, then compare the timing and the inequality. A disagreement about what was knowable is not solved by pointing to the later target.

For this lesson the minimum useful packet is both attempts, the reaction pivot and the confirming close. Preserve the original precision and include the clock used. If another reader can reproduce the number but not the label, examine the equality rule and prerequisite. If they cannot reproduce the number, settle the input discrepancy first. These are different faults, and only the second can be repaired by retrieving better data.

Two of the five settled observations pass the written screen. If F ultimately passes, the count becomes three of six; if it fails, two of six. This bound is useful because it exposes the effect of missing evidence without inventing a future bar. It says nothing about predictive accuracy. To investigate that, lock the rule, select new sessions and only then examine what happened after each independently labelled structure.

A test you can run on unseen sessions

Compare strict failures with raids that share the same subsequent break and entry rule. Track how often the intact original level is later reached before the planned target.

Make one dated record for each session you inspect, including those in which the required condition never appears. Keep a count of eligible signals, orders placed, orders filled and positions closed. A result per fill answers a different question from a result per session. Separate them before comparing this rule with another way of reading failed attempt at an old extreme.

Frequently asked questions

To put this worksheet beside a live chart, use the guides to London Kill Zone timing and the Judas Swing to define the session question. Then compare market structure shifts for confirmation, fair value gaps for the return price, and order blocks for the larger area behind the move.