Continuation Failure Engine 2-F2 (A+ Only)

Continuation Failure – High-Prob 2-F2 (A+ Only)
Best Timeframe: 15-minute chart
Usage:
Designed to detect high-probability 2-bar continuation failures (Failed 2 setups) graded A+. Works best when combined with the Strat Structure Engine 3-F2 Tiered. You will also find the same high-probability failures occurring in the 3-F2 setups, providing complementary confirmation.
Key Areas for Setup Identification:
Session highs and lows from Sessions & ICT Killzones (0xCryptoVince)
Fair Value Gap [LuxAlgo] Extend FVG to 300
Strat Assistant [Ricky Caroll]
30-minute Opening Range Breakout (ORB)
VWAP [ O,H,L,C- 4]
Signal Logic:
Failed 2-Up (red label): Price attempted upward continuation but reversed — potential short.
Failed 2-Down (green label): Price attempted downward continuation but reversed — potential long.
A+ Grade Criteria: Strong ATR range, close against trend, large body, above-average volume.
Alerts: Configurable for all A+ setups, triggers at bar close when a 2→F2 occurs.
Notes: Use this script to identify high-probability failures at the defined key zones. Works best in conjunction with the 3-F2 structure for a complete Strat analysis and to locate overlapping failure setups.
Supplementary Information / Facts:
What a Failed 2 actually represents (fact)
In The Strat, a Failed 2 is objectively defined as:
Price attempts continuation in one direction (breaks a prior high or low),
Fails to follow through, and
Closes back inside / opposite.
That is not just a candle pattern — it is failed acceptance of price, which aligns with auction market theory:
Markets probe for value
If participation is weak → rejection occurs
Source: CME Group – Understanding Market Profile & Auction Theory
Why session highs/lows matter (fact)
Asia / London / NY highs & lows are:
Liquidity pools
Areas where resting stop orders accumulate
Known reference points for both discretionary and systematic traders
Large participants expect liquidity there. When price breaks a session high/low:
Stops trigger
Liquidity is accessed
If no higher-timeframe acceptance appears → price snaps back
That snapback is exactly what your Failed 2 is capturing.
Source: CME Group – Liquidity, Stops, and Market Structure
Why VWAP keeps lining up (fact)
VWAP is not mystical — it is:
The average price weighted by volume, used institutionally as a fair-value benchmark.
Institutions actively defend VWAP:
Above VWAP = favorable for longs
Below VWAP = favorable for shorts
When price:
Extends away from VWAP,
Attempts continuation,
Fails and reclaims VWAP,
You often get a Failed 2 reversal because the auction rejected “unfair” price.
Source: Berkowitz et al., VWAP Trading Strategies (Journal of Trading); CME Group – VWAP as Institutional Benchmark
Why Fair Value Gaps are magnets for Failed 2s (fact + interpretation)
Fact: A Fair Value Gap (FVG) represents:
Inefficient price discovery
One-sided aggressive order flow
Thin participation
Markets statistically revisit inefficiencies.
What happens at an FVG:
Price returns
Liquidity is tested
Either acceptance or rejection occurs
When price:
Tags an FVG,
Attempts continuation,
Immediately fails,
You get a textbook Failed 2 at an inefficiency — the market saying:
“We checked — no agreement here.”
Source: ICT Concepts (FVG definition); CME Market Microstructure Research on inefficiencies
Concise, Factual Summary / Market Logic:
Liquidity Concentration: Session highs/lows and VWAP are key points where liquidity (orders) naturally accumulates. Price reacting there creates conditions for patterns like your Failed 2 setups.
Market Efficiency: VWAP represents fair value in the session, so price churn near it can trigger imbalance formations or pattern failures.
Imbalance Correction: FVGs are inefficiencies — when price interacts with them after an impulsive move, setups often occur because unfilled orders and market makers revisit those prices.
Confluence = Higher Probability: The strongest reactions happen when FVGs overlap session highs/lows or interact with VWAP, because confluence magnifies where market structure and liquidity converge.