LBF and LAF: Look Below and Fail, Look Above and Fail

What actually happens

Price pokes below a reference level — prior-day low, overnight low, the bottom of the balance zone. If there is real supply below, price accepts down there and keeps going. If there is not, the probe finds no business, offers get pulled, and price snaps back inside the range. That snap-back is the LBF. Flip it for the LAF above the range.

The failure is the signal. Not the probe. Traders lose money on this setup by entering during the probe instead of waiting for the failure to be confirmed.

What qualifies as a valid LBF

• A clearly defined level everyone can see (prior-day low, overnight low, balance edge).
• A probe below it that trades for only a few minutes — not an extended stay.
• Volume on the probe that does not build. Building volume below = acceptance, not failure.
• A reclaim of the level on the execution timeframe.

The mechanics

1. Entry trigger: the first 2m close back above the level after the probe. Aggressive version: enter on the reclaim of the level intrabar with a tighter stop.
2. Stop: hard disaster stop 2–3 ticks below the probe low. If the probe low is more than ~10 ticks away on ES, the setup is too wide — skip it.
3. Target 1: session VWAP. Scale one third.
4. Target 2: the opposite edge of the balance zone. This is where the multi-R lives.
5. Risk sizing: 1% of account maximum. Stop in ticks × tick value × contracts must equal that number or less.
6. Invalidation: price returns below the level and trades there with volume building. The failure failed — exit immediately rather than waiting on the stop.

The LAF is the mirror

Probe above prior-day high or the top of balance, no acceptance, offers reload, price comes back inside. Short the reclaim back below the level, hard stop above the probe high, first target VWAP, second target the lower balance edge. Same invalidation logic in reverse.

The most common mistake

Trading LBF/LAF in a trending market. These are balance-market setups. If the session is one-way and price is accepting at every extension, a probe below is not a failure — it is a continuation, and you will be run over. Confirm you are in balance before you take either one.