Trading FTBs
FTB
An FTB or a “First Time Back”, is when the markets move BACK to an FTR that was previously formed. This is a manipulation play that is created by the market makers to trap people in the wrong direction of trades and then price continues in the direction of the overall trend. This is why we call FTBs a trend continuation pattern, while FTR was called a momentum continuation.
FTB Rules:
- Use TF 15m+
- Stick with the trend
- Price Must Create a Single FTR candle
- Price Must Pull Far away from the FTR candle before coming back (10+ pips)
- On the Retest, the Candle MUST close INSIDE the FTR zone and the next close OUT of the zone.
- If price moves away from FTR, then consolidate before coming back=INVALID.
- Place Stop Loss Below/Above FTR candle (including wick), be able to adjust based on the scenario.
- If on the FTR retest the candle Closes through the FTR zone=INVALID.
Bullish
Above is a simple graphical example of what a bullish FTB should look like. The market is in an uptrend and then creates and FTR. After this FTR creation the market cleanly pulls away from the FTR zone, and then cleanly pulls back to the FTR zone. Next, price closes inside of the FTR zone (the zone can be the FTR body or FTR range, it’s up to you) and then the next period (candle) price closes outside. This creates a valid FTB set up. Finally, the ideal stop loss would be below the FTR candle/range and ideal take profit would be at the recent high created.
AUD/USD 1h
Above is a bullish FTB example that I personally executed last week (check out on my IG here). In this example, we can see that the market was in an uptrend and then created a single FTR. Price then pulled away cleanly before coming back to the FTR. Price closed inside of the range and then the next candle just closed outside (I personally entered after the bearish engulfing because I missed the first confirm) indicating a potential trade. Next, we must measure the range and stop loss and see if the risk to reward is solid, which it is (1:1.84 risk to reward). Next, the take profit will be the upper zone, the most recent high, but as you can tell the market clearly broke through and actually traded 40+ pips past the TP zone, which is the upside to following trends.
Bearish
Above is a simple graphical example of what a bearish FTB should look like. The market is in a downtrend and then creates and FTR. After this FTR creation the market cleanly pulls away from the FTR zone, and then cleanly pulls back to the FTR zone. Next, price closes inside of the FTR zone (the zone can be the FTR body or FTR range, it’s up to you) and then the next period (candle) price closes outside. This creates a valid FTB set up. Finally, the ideal stop loss would be above the FTR candle/range and ideal take profit would be at the recent lows created.
USD/JPY 1h
Above is a live example of a bearish FTB that occurred last week. The market created a very large FTR during a large downtrend and then continued trending down for over half of a day. The market then pulled back (without consolidating) and trended right back up into the FTR zone, closed inside, and then the next candle closed back below, indicating a potential sell trade. Following the same strict rules, our stop loss being above the FTR zone/wicks, and take profit at the recent low formed the risk-reward for this trade was 1:2.5. This trade is an example of when the market didn’t continue to the downside after the take profit zone, so you must always be doing current market condition analysis and protecting profits.
Conclusion
All in all, the FTB is a powerfull technical strategy that is very strict which allows traders to maximize potential profits and minimize unnecessary losses. If you are a busy trader and do not have time to always be looking at the charts, check out my FTR indicator (which also alerts for FTBs when they form). It does not signals and you still must do personal analysis, but the software does greatly help to save time and miss fewer opportunities.
