QUADRANT FAILURES In the previous section of Part 2, we explained the difference between two types of corrections, one strategic and the other tactical.

Both of these trade locations are WITH-trend, meaning they provide opportunities to initiate or add to longs in a primary bull market or initiate or add to shorts in a primary bear market.

Here in this last section of Part 2, we define, in a general way, a third type of trade location which we call a “quadrant failure”. A quadrant failure is a variation of a concept first introduced by Joseph Hart (see Trend Dynamics).

An upper quadrant failure (quad failure sell) is a counter-trend top that forms in a rising market.  In the Eurodollar/U.S. Dollar FOREX pair (see weekly chart, below) a strategic correction occurred from X-to-A.  We call the reversal at B a “quad failure” as the trade location for the reversal & top occurs in the upper quadrant of range X-to-A.
 
This is, of course, a counter-trend trade location and we apply additional filters to pinpoint this type of price action.