This article explores the "Three-Push Failure," a Wyckoff-inspired approach to trading terminal shakeouts and failed breakouts. This setup is for traders who have a deep understanding of market structure and can identify the subtle signs of distribution and accumulation that precede a major trend re

This article explores the "Three-Push Failure," a Wyckoff-inspired approach to trading terminal shakeouts and failed breakouts. This setup is for traders who have a deep understanding of market structure and can identify the subtle signs of distribution and accumulation that precede a major trend reversal.

Setup Description: The Three-Push Failure

The Three-Push Failure, also known as a "three-drives" pattern, is a terminal pattern that often occurs at the end of a prolonged trend. It consists of three successive price thrusts, each one making a new high or low, but with diminishing momentum. The failure of the third push is the signal that the trend is exhausted and a reversal is imminent.

Key Characteristics

• Three Pushes: Three distinct price thrusts in the direction of the trend.
• Diminishing Momentum: The second and third pushes are often smaller in price and accompanied by lower volume and momentum divergence (e.g., on the RSI or MACD).

Entry and Exit Rules

Entry Criteria

1. Three Pushes: Identification of a clear three-push pattern.
2. The Failure: The entry is triggered when the price breaks the trendline connecting the lows of the three pushes (in an uptrend) or the highs (in a downtrend).

Exit Strategy

• Profit Target: The origin of the three-push pattern.
• Stop Loss: Placed just beyond the high/low of the third push.

Risk and Money Management

• Risk per Trade: 1% of account equity.
• Position Sizing: Standard position sizing formula.
• Daily Stop: 2R daily loss limit.

Edge Definition

The edge of the Three-Push Failure comes from its ability to identify major trend reversals with a high degree of accuracy. The setup has a good win rate and an excellent reward-to-risk ratio.

• Win Rate: 60-65%
• Profit Factor: (0.65 * 3) / (0.35 * 1) = 5.57