Trade Execution on EURNZD|PRZ Area of Interest Simplified I hope you got value from the video, more to come, and wishing you all a more profitable trading opportunity.
Harmonictraders
HARMONIC PATTERNS TRADING | ABCD PATTERN & HOW TO TRADE IT
Harmonic ABCD pattern is a classic reversal pattern.
In this article, I will teach you how to recognize that pattern and trade it properly.
This pattern is composed of 3 main elements (based on wicks of the candles):
1️⃣ AB leg
2️⃣ BC leg
3️⃣ CD leg
The pattern is considered to be bullish if AB leg is bearish.
The pattern is considered to be bearish if AB leg is bullish.
AB leg must be a strong movement without corrections within.
A is its initial point and B is its completion point.
BC leg is a correctional movement from B point after a completion of AB leg. The price may fluctuate within that.
B is its initial point and C is its completion point.
CD leg must be a strong movement without corrections within.
C is its initial point and D is its completion point.
❗️ABCD movement is harmonic if the length and the time horizon of AB and CD legs are equal.
By the length, I mean a price change from A to B point and from C to D point.
By the time, I mean a time ranges of AB leg and CD leg.
If the time and length of AB and CD legs are equal, the pattern is considered to be harmonic, and a reversal will be expected from D point at least to B point.
🛑If the pattern is bullish, stop loss must be placed below D point.
🛑If the pattern is bearish, stop loss is placed above D point.
Initial target level is B point.
Usually, after reaching a B point the market returns to a global trend.
What pattern do you want to learn in the next post?
Harmonics don't work...Here's how I find my set ups I thought I'd share with you guys the process I use to find my shark setups, this is a strategy I've back-tested and tested several times. I must say textbook harmonic talk poop, the values I use work but the set-up I see written for the shark uses different values. I noted this and thought about it for a minute - then I said so can I break the rules or amend it, because what I see is making sense but following the book is frustrating me lol...
I mean it got through to me through multiple accounts including personal and funded accounts - (side note I'm not rich) hopefully this helps to to understand how I spot moves.
As long as you journal then you have a chapter to start from and that 1!!!!!
Harmonic Patterns in Trading: A simple introductionIntroduction
In the world of trading, we often hear about harmonic patterns. These are very special tools in the trader's toolkit. They are complex but very important. In this article, we look into these patterns, how traders use them, and why they are crucial.
Understanding Harmonic Patterns
Harmonic patterns are part of technical analysis in trading. They come from Fibonacci numbers and show potential future price movements. These patterns are not random; they are specific geometric shapes in the markets. Some well-known patterns are Gartley, Bat, Butterfly, Crab, and Shark. Each pattern is unique and uses Fibonacci in a different way.
Top Harmonic Patterns
Gartley Pattern: This is a very famous pattern. It looks like an 'M' or 'W' shape. It helps traders to find good points for buying or selling.
Bat Pattern: This pattern is similar to Gartley but with different Fibonacci measurements. It's known for its high accuracy in predicting market reversals.
Butterfly Pattern: This pattern indicates a strong reversal. It's like Gartley and Bat but has a longer 'wing'.
Crab Pattern: Known for its extreme accuracy, the Crab pattern offers precise entry and exit points.
Shark Pattern: This is a newer pattern. It helps to identify very sharp and sudden changes in the market.
Fibonacci and Markets: A Symbiotic Relationship
Fibonacci sequence is a series of numbers important in many areas, including markets. Traders use these numbers to predict where the market might go.
Importance of Harmonic Patterns in Trading
Predicting Markets: These patterns help traders to guess future market movements, unlike other tools that only analyze past data.
Strategic Trading: They offer clear points for entering and exiting trades, which helps in planning.
Versatility: Useful in various markets like forex, stocks, and cryptocurrencies.
Risk Management: They provide structured ways to manage trading risks.
Complementing Strategies: Harmonic patterns can be combined with other market analysis methods for stronger trading strategies.
Learning Curve
Understanding harmonic patterns requires time and market knowledge. But they offer a clear insight into market behavior, which is very valuable for traders.
Challenges
Using harmonic patterns can be tricky. They need correct identification, and market volatility can sometimes affect their accuracy. So, traders need to be adaptable.
Conclusion
Harmonic patterns are a mix of mathematics and market understanding. They use Fibonacci to interpret market movements. For traders willing to learn, they offer deeper market insights. In trading, understanding these patterns can be a great advantage.
From A to D:How to Use the ABCD Pattern to Forecast Market MovesAre you familiar with the ABCD trading pattern?
In this article, I will provide a comprehensive explanation of the ABCD trading pattern, including its characteristics, how to identify it, and how to use it in trading. So, sit back, relax, and enjoy the information provided in this article.
The ABCD ( AB=CD ) pattern , It's a harmonic pattern that is easily recognizable on a price chart and is composed of four points. This pattern follows a specific sequence of market movements that traders can use to predict potential price swings in the future. The ABCD pattern can be applied in various market conditions, including both bullish and bearish markets, and can be used to speculate on the movement of different forex pairs by simultaneously selling one currency and buying another. However, it's important to keep in mind that the ABCD pattern should not be the sole basis for making trading decisions. It should be used as a tool to inform your decisions.
The first step in opening a position using the ABCD pattern is to identify the pattern on a price chart. Multiday charts can provide insight into the behavior of forex markets over an extended period. You can use daily, hourly, or minute-by-minute charts to spot the pattern, but it's crucial to choose a time horizon that aligns with your goals. For instance, traders looking to hold positions for days or weeks may prefer daily charts instead of minute charts.
Once you have selected the appropriate chart type, you can search for the ABCD pattern to identify bullish or bearish signals.
Let's now take a closer look at how the AB=CD pattern forms and how to spot it:
When identifying the ABCD pattern, traders focus on the legs or moves between points. The moves in the direction of the overall trend are denoted as AB and CD, while BC represents the retracement.
Once you think you have identified an ABCD pattern on a price chart, the next step is to use Fibonacci ratios to validate it. This process can also help you pinpoint where the pattern may complete and where to consider opening your position.
The "classic" ABCD pattern follows a specific sequence of market movements, with the following rules:
In a "classic" ABCD pattern, the BC line should ideally be 61.8% or 78.6% of AB. To determine this, traders often use the Fibonacci retracement tool on the initial move from point A to point B. The BC line should end at either the 61.8% or 78.6% Fibonacci retracement level of AB. This helps confirm the validity of the ABCD pattern and gives an idea of where to potentially open a position.
Once the BC leg of the pattern is complete, traders would typically look for the CD leg to reach the 127.2% or 161.8% extension of the BC leg. At this point, traders might consider entering a sell position if the pattern is bearish or a buy position if the pattern is bullish.
The ABCD pattern extension occurs when the CD leg extends beyond the typical 127.2% and reaches 161.8%. This indicates that the price trend may continue in the same direction for a longer period, providing a potentially profitable trading opportunity for traders who have correctly identified the pattern. It's important to note that this extension is not always reliable and should be used in conjunction with other technical analysis tools to confirm the validity of the trade.
Note: In strongly trending markets, the retracement (BC) may not reach the usual 61.8% or 78.6% of AB, but only 38.2% or 50%. It's important to adapt to market conditions and adjust your analysis accordingly.
Moreover:
During the move from A to B, the market should not exceed either A or B.
During the move from B to C, the market should not exceed either B or C.
During the move from C to D, the market should not exceed either C or D.
For a bullish ABCD, point C must be lower than A, and D must be lower than B.
For a bearish ABCD, point C must be higher than A, and D must be higher than B.
To identify an ABCD pattern on your TradingView trading chart, follow these six steps:
1 ) Log in to your TradingView trading account and open a market chart.
2 ) Locate the AB line. Remember that this move should be completely contained within points A and B.
3 ) Locate the BC retracement. This should reach either the 61.8% or 78.6% level of the move from A to B.
4 ) Draw the CD line. Using the AB and BC lines, you should be able to predict where point D will fall. CD will generally be equivalent to AB and either 127.8% or 161.8% of BC in both price and time.
5 ) Keep an eye out for price gaps and wide-ranging bars in the CD leg. These can indicate that an extension is forming, implying that CD may be longer than AB.
6 ) Trade the possible retracement at point D. If you've identified a bearish ABCD pattern, consider opening a sell position. On the other hand, if you've found a bullish one, consider buying.
And here are a couple of examples:
I hope you found this guide on identifying the ABCD pattern useful. Let me know your thoughts in the comments section below, and don't forget to like and follow me if you found this guide helpful.
Harmonic Bat Pattern for traders can apply on any time frameThe Bat is defined by the .886 retracement of move XA as Potential Reversal Zone. The Bat pattern has the following qualities:
Move AB should be the .382 or .500 retracement of move XA.
Move BC can be either .382 or .886 retracement of move AB.
If the retracement of move BC is .382 of move AB, then CD should be 1.618 extension of move BC. Consequently, if move BC is .886 of move AB, then CD should be 2.618 extension of move BC.
CD should be .886 retracement of move XA.
📊 Harmonic Patterns Cheat SheetHarmonic Patterns use the identification of quantified chart price action structures that have specific and consecutive Fibonacci ratio alignments that form the visual structures. Harmonic patterns calculate the Fibonacci levels of the price patterns to identify high probability reversal points on the charts. This method believes that harmonic patterns or cycles repeat on charts in cycles repeatedly. The key to using this strategy is to identify these patterns and to use them for creating good risk/reward ratio entries and to exit when a profit target is reached. Positions are taken based upon the odds that the same historic patterns will repeat after entry.
🔹 Butterfly
The structure of the Butterfly pattern requires a specific alignment of Fibonacci measurements at each point within the structure. Most important, a mandatory 0.786 retracement of the XA leg as the B point is the defining element of an Ideal Butterfly Pattern and it acts as the primary measuring point to define a specific Potential Reversal Zone. In many ways, the Ideal Butterfly Pattern is like the Gartley Pattern because it requires a specific B point retracement and possesses a tighter array of Fibonacci ratios within the structure. Specifically, the Butterfly incorporates a 1.27 XA projection with a “tame” BC projection, which is usually only a 1.618. In addition, the Butterfly usually possesses an equivalent AB=CD pattern or an alternate 1.27AB=CD pattern. Although the equivalent AB=CD is a minimum requirement, valid Butterfly structures rarely exceed the alternate 1.27 AB=CD completion point.
🔹 Shark
The Shark Pattern is dependent upon the powerful 88.6% retracement and the 113% Reciprocal Ratio, works extremely well retesting prior support/resistance points (0.886/1.13) as a strong counter-trend reaction. Represents a temporary extreme structure that seeks to capitalize on the extended nature of the Extreme Harmonic Impulse Wave. Demands immediate change in price action character immediately following pattern completion. Extreme Harmonic Impulse Wave utilized depends upon location of 88.6% level – these are minimum requirements. Requires an active management strategy to capture high probability profit segments.
🔹 Gartley
The important features of the Gartley are the specific location of the various points: X,A,B,C and D. The X-A leg is the largest price move in the pattern. It is followed by a counter move of A to B. The first leg, A to B, sets up the potential AB=CD, which is crucial to the completion of the pattern and to the indication of the reversal zone. After a brief and smaller B to C retracement, the C to D leg is established. A precise calculation of the AB=CD will provide a significant potential reversal point. Ideal Gartley The ideal Gartley set-up will be defined by specific Fibonacci retracements. One of the most important numbers in the pattern is the completion of point D at the 0.786 of XA. Although the price action might exceed this number slightly, it should not exceed point X. The pattern is a nice set-up, especially with the convergence of an AB=CD.
🔹 Bat
The Bat pattern is probably the most accurate pattern in the entire Harmonic Trading arsenal. The pattern possesses many distinct elements that define an excellent Potential Reversal Zone. The pattern typically represents a deep retest of support or resistance that can frequently be quite sharp. Quick reversals from Bat pattern PRZs are quite common. In fact, valid reversals from Bat patterns frequently possess price action that is quite extreme. The pattern incorporates the powerful 0.886XA retracement, as the defining element in the Potential Reversal Zone. The B point retracement must be less than a 0.618, preferably a 0.50 or 0.382 of the XA leg. The most ideal B point alignment is the 50% retracement of the XA leg. The B point is one of the primary ways to differentiate a Bat from a Gartley pattern. If a pattern is forming and the B point aligns at a 0.50 of the XA leg, it is likely to be a Bat.
🔹 Three Drive
The three drives pattern consists of a series of higher highs or higher lows. It is similar to the ABCD pattern. The difference is that a Three drives pattern is made of 5 legs, while an ABCD pattern has only 4. Three-Drives is a reversal pattern, so it signals an upcoming change in a trend. Point A is at the 61.8% retracement of the drive 1. Point B is at the 61.8% retracement of the drive 2. Drive 2 is at the 127.2%-161.8% extension of A. Drive 3 is at the 127.2%-161.8% extension of B. You can enter the market when you are sure that the market has formed the point B (buy in a bearish Three-Drive and sell in a bullish Three Drive). Take Profit should be around the 127.2%-161.8% extension of B.
🔹 Cypher
The Cypher pattern, which can be either bullish or bearish, has five points (X, A, B, C, and D) and four legs (XA, AB, BC, and CD). Like any other harmonic pattern, the theory behind the Cypher chart pattern is that there is a strong correlation between Fibonacci ratios and price movements. Eventually, the market is expected to reverse from point D after the four market swing wave movements – X to A, A to B, B to C, and C to D. B point retracement of the primary XA leg ranges between 38.2% to 61.8% Fibonacci levels. C point is an extension leg with a Fibonacci ratio that should be between 127.2% to 141.4% of the primary XA leg. D point should break the 78.6 retracement level of XC.
🔹 AB=CD
In this pattern, the A to B leg is the first price move. After a brief retracement from point B to point C, the pattern will complete the C to D leg, which is the same length as AB. Simply, after the AB and BC legs have been established, you project the AB length from point C… Although the price action will not always be exactly equivalent, the AB=CD legs usually will be close enough to determine the reversal points. Sometimes, this pattern will be exact but I usually wait for the CD leg to at least equal the AB leg. The Fibonacci numbers in the pattern must occur at specific points. In an ideal AB=CD Pattern, the C point must retrace to either a 38.2% at a minimum to validate the structure. The maximum retracement of the AB leg is an 88.6% level that defines a less extreme AB=CD pattern formation but still valid.
🔹 Crab
The Crab is a distinct 5-point extension structure that utilizes a 1.618 projection of the XA leg exclusively. This is the most critical aspect of the pattern and the defining level in the Potential Reversal Zone (PRZ). The extreme (2.618, 3.14, 3.618) projection of the BC compliments the 1.618 XA extension. In addition, the Crab primarily utilizes an alternate AB=CD to compliment the PRZ. Although a minimum AB=CD completion is necessary for a valid structure, the alternate 1.27 or 1.618 calculation are the most frequent cases. The 1.618 AB=CD pattern is the most common alternate calculation utilized in the structure. It is important to note that the alternate AB=CD pattern within the Crab is the least important number in the PRZ.
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CYPHER Harmonic Pattern - Made Easy For Everyone !The Cypher harmonic pattern is a technical analysis indicator used by traders to identify valuable support and resistance levels based on the Fibonacci sequence of numbers and detect trend reversals.
Here, in this article, we explain how the Cypher harmonic pattern works, identify it, and trade it.
What is the Cypher Harmonic Candlestick Pattern?
The Cypher harmonic pattern is a technical analysis formation indicating a price-action reversal.
The pattern was discovered by D. Oglesbee and is known as a relatively advanced pattern formation. In structure, the Cypher pattern is similar to the butterfly harmonic pattern; however, the Cypher is not a very common chart pattern due to its unique Fibonacci ratios.
The Cypher pattern, which can be either bullish or bearish, has five points (X, A, B, C, and D) and four legs (XA, AB, BC, and CD). Like any other harmonic pattern, the theory behind the Cypher chart pattern is that there is a strong correlation between Fibonacci ratios and price movements.
Eventually, the market is expected to reverse from point D after the four market swing wave movements
How to Identify and Use the Cypher Harmonic Pattern in Forex Trading?
Much like any other harmonic chart pattern, several conditions must occur so you can identify the Cypher pattern:
B point retracement of the primary XA leg ranges between 38.2% to 61.8% Fibonacci levels
C point is an extension leg with a Fibonacci ratio that should be between 127.2% to 141.4% of the primary XA leg
D point should break the 78.6 retracement level of XC
Let’s see what the Cypher harmonic pattern looks like on a trading chart.
Cypher Pattern – Set a Stop Loss
A reasonable stop-loss level when trading the Cypher pattern is simple and does not necessarily require the combination of Fibonacci retracement.
All you need to do is to place the stop loss somewhere below the D level because if this level breaks, the entire Cypher pattern is invalidated. So, the stop would be placed at the next support or resistance level, which is the X-point
Cypher Pattern – Set a Take Profit Target
The simple Cypher pattern trading method is using its points as profit targets, meaning the A and C levels.
How accurate is the Cypher harmonic chart pattern?
The Cypher harmonic pattern has been historically proven to be a fairly reliable and accurate chart pattern. According to various studies, the pattern has an accuracy rate of around 70%.
Bat Harmonic Pattern - Made Easy For Everyone !The BAT pattern gets its name from the bat-shaped end product. Identified by Scott Carney in 2001, the BAT pattern is made up of precise elements that identify PRZs.
The bat harmonic pattern follows different Fibonacci ratios. One of the major ways to differentiate it from a Cypher pattern is the B point which, if it doesn’t go above the 50 percent Fibonacci retracement of the XA leg then it is a bat, otherwise it can turn into a cypher structure.
The market strategy of the pattern is suitable for all time frames and all markets types. Traders have to keep in mind that on lower time frames using the bat pattern market strategy has some challenges because the pattern tends to appear on less frequent on lower time frames.
How to Draw a Bat Pattern :
As mentioned earlier, the bat harmonic pattern looks very similar to the Gartley pattern . It has four different legs marked as X-A, A-B, B-C, and C-D.
X-A: In its bullish version, the first leg appears when the price sharply increases from point X to point A. This is the longest leg of the pattern.
A-B: The A-B leg then sees the price switching direction and retracing 38.2 to 50 percent using the Fibonacci retracement of the distance covered by the X-A leg. Have it in mind that the A-B leg can never retrace beyond point X. But if it does, the pattern is considered invalid. As you can see, if the price with a spike reaches a point under 50% but with the body above, this will be Valid. The candle Body's important.
B-C: Here, the price changes direction for a second time and moves back up, retracing anything from 38.2 to 88.6 percent of the distance covered by the A-B leg. If it retraces up above the high of point A, the pattern is considered invalid.As you can see, if the price with a spike reaches a point above 88.6% but with the body is below, this will be Valid. The candle Body's important.
C-D: This is the last and most significant aspect of the pattern. As with the Gartley pattern , this is where the bat harmonic pattern ends and traders place their long (buy) trade at point D. ( PRZ Potential Reversal Zone )
The 88.6% percent retracement of the X-A leg is our Entry Point. D POINT or PRZ
Before trying and trading the pattern, confirm from this checklist that the pattern is real. It should include these vital elements:
A-B : 38.2 to 50% max percent using the Fibonacci retracement
B-C : An 38.2 to 88.6% max percent Fibonacci retracement of the X-A leg
C-D : The 88.6% percent retracement of the X-A
Market strategy:
Step 1: Drawing the pattern
Begin by clicking on the XABCD pattern indicator that is found on the right-hand side toolbar of Tradingview
Identify the beginning point X, which can be any swing high or low point on the chart.
You should get 4 points or 4 swings high/low points that join and form the harmonic bat pattern strategy as explained Above
Step 2: Trading the pattern
The 88.6 percent Fibonacci ratio provides traders a more reliable risk/reward ratio which is why the market strategy of the bat pattern is such a very popular as a market strategy. The best entry point is the 88.6 percent Fibonacci retracement which is a very accurate market turning point.
It is recommended that traders should enter as soon as they touch the 88.6 percent figure. Oftentimes the harmonic bat pattern strategy doesn’t go much above this level.
Step 3: Placing a stop-loss
Usually, traders should place their protective stop-loss lower than the point X of a harmonic bat pattern . That is the only logical location to hide the stop-loss because any break below will automatically invalidate the pattern.We use as manual the 113% Fibo of X-A as a picture below.
Step 4: Take-profits
There can be several ways to manage your trades, but the best target for this pattern should be to use a multiple-take profit formula. For this pattern strategy, take the first partial profit once you hit wave-B level and the remaining half wave-C.
Once the price reaches the first target you should move the Stop Loss at BE ( breakeven - entry point ) or close the position in profit.
By doing this you will accomplish two things:
first, you’ll ensure that you accumulate profits and secondly, if the markets reverse, you ensure you’re stopped at BE and don’t lose any money.
There are many ways to calculate the Take profits Target, this is one of the most used and we suggest starting in this way.
Identical rules to draw and set parameters like stop loss and take profits are for the Bearish version. Nothing changed.
Please note this is an introduction to the BAT pattern , for beginners. I tried to make it more easy and simple as I can.
Bat Harmonic Pattern - Made Easy For EveryoneThe BAT pattern gets its name from the bat-shaped end product. Identified by Scott Carney in 2001, the BAT pattern is made up of precise elements that identify PRZs.
The bat harmonic pattern follows different Fibonacci ratios. One of the major ways to differentiate it from a Cypher pattern is the B point which, if it doesn’t go above the 50 percent Fibonacci retracement of the XA leg then it is a bat, otherwise it can turn into a cypher structure.
The market strategy of the pattern is suitable for all time frames and all markets types. Traders have to keep in mind that on lower time frames using the bat pattern market strategy has some challenges because the pattern tends to appear on less frequent on lower time frames.
How to Draw a Bat Pattern :
As mentioned earlier, the bat harmonic pattern looks very similar to the Gartley pattern. It has four different legs marked as X-A, A-B, B-C, and C-D.
X-A: In its bullish version, the first leg appears when the price sharply increases from point X to point A. This is the longest leg of the pattern.
A-B: The A-B leg then sees the price switching direction and retracing 38.2 to 50 percent using the Fibonacci retracement of the distance covered by the X-A leg. Have it in mind that the A-B leg can never retrace beyond point X. But if it does, the pattern is considered invalid. As you can see, if the price with a spike reaches a point under 50% but with the body above, this will be Valid. The candle Body's important.
B-C: Here, the price changes direction for a second time and moves back up, retracing anything from 38.2 to 88.6 percent of the distance covered by the A-B leg. If it retraces up above the high of point A, the pattern is considered invalid.As you can see, if the price with a spike reaches a point above 88.6% but with the body is below, this will be Valid. The candle Body's important.
C-D: This is the last and most significant aspect of the pattern. As with the Gartley pattern, this is where the bat harmonic pattern ends and traders place their long (buy) trade at point D. ( PRZ Potential Reversal Zone )
The 88.6% percent retracement of the X-A leg is our Entry Point. D POINT or PRZ
Before trying and trading the pattern, confirm from this checklist that the pattern is real. It should include these vital elements:
A-B : 38.2 to 50% max percent using the Fibonacci retracement
B-C : An 38.2 to 88.6% max percent Fibonacci retracement of the X-A leg
C-D : The 88.6% percent retracement of the X-A
Market strategy:
Step 1: Drawing the pattern
Begin by clicking on the XABCD pattern indicator that is found on the right-hand side toolbar of Tradingview
Identify the beginning point X, which can be any swing high or low point on the chart.
You should get 4 points or 4 swings high/low points that join and form the harmonic bat pattern strategy as explained Above
Step 2: Trading the pattern
The 88.6 percent Fibonacci ratio provides traders a more reliable risk/reward ratio which is why the market strategy of the bat pattern is such a very popular as a market strategy. The best entry point is the 88.6 percent Fibonacci retracement which is a very accurate market turning point.
It is recommended that traders should enter as soon as they touch the 88.6 percent figure. Oftentimes the harmonic bat pattern strategy doesn’t go much above this level.
Step 3: Placing a stop-loss
Usually, traders should place their protective stop-loss lower than the point X of a harmonic bat pattern. That is the only logical location to hide the stop-loss because any break below will automatically invalidate the pattern.We use as manual the 113% Fibo of X-A as a picture below.
Step 4: Take-profits
There can be several ways to manage your trades, but the best target for this pattern should be to use a multiple-take profit formula. For this pattern strategy, take the first partial profit once you hit wave-B level and the remaining half wave-C.
Once the price reaches the first target you should move the Stop Loss at BE ( breakeven - entry point ) or close the position in profit.
By doing this you will accomplish two things:
first, you’ll ensure that you accumulate profits and secondly, if the markets reverse, you ensure you’re stopped at BE and don’t lose any money.
There are many ways to calculate the Take profits Target, this is one of the most used and we suggest starting in this way.
Identical rules to draw and set parameters like stop loss and take profits are for the Bearish version. Nothing changed.
Please note this is an introduction to the BAT pattern, for beginners. I tried to make it more easy and simple as I can.
LEARN HARMONIC PATTERNS TRADING | ABCD PATTERN 🔰
Hey traders,
Harmonic ABCD pattern is a classic reversal pattern.
This pattern is composed of 3 main elements (based on wicks of the candles):
1️⃣ AB leg
2️⃣ BC leg
3️⃣ CD leg
The pattern is considered to be bullish if AB leg is bearish.
The pattern is considered to be bearish if AB leg is bullish.
AB leg must be a strong movement without corrections within.
A is its initial point and B is its completion point.
BC leg is a correctional movement from B point after a completion of AB leg. The price may fluctuate within that.
B is its initial point and C is its completion point.
CD leg must be a strong movement without corrections within.
C is its initial point and D is its completion point.
❗️ABCD movement is harmonic if the length and the time horizon of AB and CD legs are equal.
By the length, I mean a price change from A to B point and from C to D point.
By the time, I mean a time ranges of AB leg and CD leg.
If the time and length of AB and CD legs are equal, the pattern is considered to be harmonic, and a reversal will be expected from D point at least to B point.
🛑If the pattern is bullish, stop loss must be placed below D point.
🛑If the pattern is bearish, stop loss is placed above D point.
Initial target level is B point.
Usually, after reaching a B point the market returns to a global trend.
What pattern do you want to learn in the next post?
❤️If you have any questions, please, ask me in the comment section.
Please, support my work with like, thank you!❤️
Harmonic PatternsHarmonic Patterns
we have so many kinds of “Harmonic Pattern”:
Black Swan
Bat
Crab
Butterfly
Gartly
White Swan
Shark
Zero_Five
Cypher
Double Top
Double Bottom
📚👌🏻 Each one of them has its unique Fibonacci levels.
⚡️ Do you want to know them?
😍 Happy to see what you find in the charts, please share yours with us
Harmonic Butterfly PatternIf B corrects between 78.8 and 88.8 from XA then it is a butterfly Pattern.
As we see Buying will be after a candle close above B level.
target will be 161.8 BC Fibonacci level.
Using Harmonic Pattern Completions to Set Direction of TradeIn this short Tutorial I discuss using Harmonic Pattern Completions on Higher timeframes to give you direction of a trade. Then moving down to a day trading timeframe and using the xbratalgo to give signals in the direction dictated by the Harmonic Pattern. And then using the Divergence Cloud to confirm trade. I used Silver Futures as an example in this video, but the strategy is the same for stocks, forex and cryptocurrency.
I hope this helps
Introduction to Auto Harmonic Pattern Recognition SoftwareA quick guide for my New Auto Harmonic Pattern recognition and trading software. Particular attention to all the settings and adjustments that traders have to adjust the colours and look of all of the functions of the indicator.
Examples on Futures, Forex and Crypto
LINK is the link to learn the Harmonics/Chart Patterns with FibsThose interested in harmonics and chart patterns must play with LINK-USDT as this volatility has been a treat for the harmonic traders and those interested in research on Harmonic and Chart patterns using Fibonacci levels. Each of the pattern drawn on chart will have to be carefully analysed using Fib retracement and Fib extension based on type of the pattern such as AB-CD, BAT/Gartley, Shark, Crab, Butterfly, Double Top/Bottom, H&S, 3 drive etc. (Not all spotted here), but you get the idea.
5-0 pattern. Bearish + 20% and bullish model + 51% Real tradingI must say almost all of this movement I took. Short + 8% (instead of 20%). At long + 55%, entry into the long was lower than shown in this example. I will attach the trading idea for which I worked below. She was published here on January 22. I used other methods of analysis and work, but I used this method that I want to talk about as evidence for my methods. The graph shows a bearish pattern , which immediately turns into a bullish 5-0 pattern, a very rare phenomenon. And that's why I decided to make this idea of training.
I want to say that the 5-0 harmonious pattern is very widely used in other markets, rarely in the cryptocurrency, due to the very low professional preparedness of the participants in this market.
Trading in this pattern can be either profitable or unprofitable, in the first place it depends not on the method itself, but on the person who uses this method. The 5-0 pattern is effective in areas of potential trend reversal. Just the pair ETH / BTC was in such a zone.
The profitability of trade largely depends not on the method of trading, but on the ability to use it.
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A bit of history.
Harmonic patterns are the development of the idea of ordinary geometric patterns, using Fibonacci levels to more accurately determine pivot points . By the way, I almost never use the Fibonacci levels, as I see without them, what they show. For beginners in trading, it is better to use them.
By the way, who did not know initially in the father of harmonious trading Harold Gartley there were no Fibonacci levels. Only more than 80 years after the creation of the theory and the successful application of Larry Pesavento in practice, did Scott Kearney begin to pervert and sculpt exact numbers for each pattern that are far from real application on the market. It’s not customary to talk about this, but their main business is not real trading, but selling books, unlike Harold Gartley , who was a successful trader in the 20-30s during the Great Depression and became a millionaire! This is not an imaginary millionaire trader, a seller of courses and books, but a real trader who made all his fortune on real trading.
In mid-1935, Harold published his best work and the first book, which, translated into Russian, was called "Profit in the Stock Market."
The initial circulation of this book totaled only 1,000 copies. This book was very popular among traders, despite its very high cost. The book was worth 1,500 dollars, at that time it was possible to buy three new Ford cars for this amount. This is many times higher than $ 1,500 nowadays. One fact is that his books, which were being sold at the height of the Great Depression, let us understand how high authority he enjoyed among the people of the world of finance. The name of the pattern is Gartley Butterfly , which bears the name of its discoverer.
Already after the death of Harold, Billy Jones bought from Harold Gartley's wife the patent rights to the book “Profit in the Stock Market”, then continued to print it in large volumes. And a "perverse improvement" in working methods for making money on book sales started. That's why I have such a negative attitude towards such "specialists."
You have to be, not seem to be.
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5-0 pattern.
Pattern 5-0 is the youngest harmonious model (it is a variation of it with the Fibonacci grid thanks to traders of books on TA). The model usually represents the first pullback of a significant reversal trend. This is a relatively new model with 4 segments and specific Fibonacci measurements of each point in its structure, which excludes the possibility of a flexible interpretation.
Formation of the figure begins with a slight movement of the market, in the direction of a previously existing trend (segment AB), which was preceded by a comparable depth correction (XA). Point B, in this case, should not be higher than the level of 161.8% of point X. This is a fundamental point. If point B "goes" higher, then almost certainly the trader is dealing with short-term correction and the continuation of the existing trend.
The segment of the aircraft, in relation to the segment AB, is formed in the range between 161.8% and 224%.
The CD segment is a correction within the framework of an emerging trend. The correction depth (according to the classical pattern algorithm) should be 50% of the BC segment.
5-0 pattern template measurements:
The segment AB should be from 1,130 - 1,618. before the XA extension.
The segment BC should be a continuation of the segment AB from 1.618 to 2.240.
Point D should be formed at the level of 0.5 segment BC .
The segment AB must be equal to the segment CD, (AB = CD).
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There are bullish and bearish formations of this pattern on the market. The graph shows both variants of the 5-0 pattern.
Bullish 5-0 pattern.
As you can see, the structure of the price movement at the time of the formation of the 5-0 pattern is generally very similar to the model of the Dragon figure with the development of goals. I made the ideas of training on this model of a figure and will fix it in ideas under the article.
Point 0 - the beginning of the downward movement, point X - the first correction upward, point A - the completion of the correction and the beginning of the fall down, point B - the end of the fall and the beginning of the strong upward movement, should be located at a level between 1.13-1.618 from XA, that the point C - the completion of a strong upward movement should be located between 1.618-2.24 from AB, point D is the end of the fall and the beginning of the upward movement, here we are trying to enter the market. The input should be at the level of 50% correction from the BC .
Bearish 5-0 pattern.
The structure of the bearish model of the 5-0 pattern is remotely similar to the model of an asymmetric head and shoulders or an inverted Dragon figure with a working out target.
Point O is the beginning of growth and the beginning of the formation of the model, point X is the beginning of correction down, point A is the beginning of growth and completion of correction, point B is the end of growth, should be located at the Fibonacci projection level between levels 1.13-1.618, point C is the end of a strong fall and the beginning of growth, point D - completion of growth, the place where we should open a deal for sale should be at the level of 50% correction from the BC .
Conservative traders are looking for additional confirmation before entering the trade. The 5-0 pattern can be either bullish or bearish . Goals can be set at the discretion of the trader, as the pivot point may be the beginning of a new trend. The common stop loss levels lie beyond the structure level beyond point D or the next important level for the Fibonacci sequence.
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Objectives for this pattern.
As it is a reversal pattern, which can act as a reversal pattern of the whole trend (the emergence of a new trend). You understand that there can be no clear goals, unlike simple figures. If you really get to the beginning of a new trend, the goals can be huge. It is important here not to exit the market prematurely. So that your profit does not turn into a loss, use the movement of stop-loss as the upward movement develops, but take into account the volatility of the instrument.
In this example, on the chart on the ETH / BTC pair, you can clearly see what the goals for this pattern can be.
The bearish model made a profit of + 20%
Channel support stopped a further drop in prices.
The bullish model made a profit of + 51%
The first goal is the resistance of the rising channel + 18%, as we see the price there was delayed for some time.
From this zone the reverse corrective movement to the support of the channel could take place. But, the price has successfully overcome this zone.
In total, the profit is + 51% of the entry point (point D).
In two models, the profit in theory was + 20 + 51% = + 70%.
But the reality is different, I have a profit of + 8% + 55% = + 60%
I rounded the interest for a better understanding, I will say one thing, there was no liquidity at the maximum to reset a significant position, and therefore the profit is much less than the theoretical one on the schedule.
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Violations of the pattern 5-0 .
More than any other pattern, the 5-0 structure presents a unique opportunity for decision making when the area of opening positions breaks through. In all 5-0 models, the best moment to enter depends on various ratios within the structure. When trying to make a deal while forming an unsuccessful 5-0 pattern, the trader still needs to look at the prevailing trend and at models at smaller time intervals.
Of course, the 5-0 pattern is not an ultra-precise model, and it may not work out even in the most correct situations on the market. What to do if the price has broken through all levels and left the channel, in such cases, the authors of harmonious trading offer quality ideas for opening positions. The first target in this case may be the area of correction 0.886 from the entire movement. Therefore, if prices fell outside the channel and broke through the 50% area, then we should expect continued decline.
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Advantages and disadvantages of pattern 5.0
Despite the popularity of this pattern, I would like to first consider the disadvantages of the pattern. The main of its shortcomings should be called the poor "recognition" of the figure. After all, not all formations in the real market, exactly correspond to the ideal book example. In this example, I used exactly the ideal option for the ease of presenting information, and a person who is interested in adding this pattern to his arsenal of trading can also look for more complex formations for work. I would advise beginners to look for ideal models for work, as they are more predictable.
The developers and "popularizers" of the pattern emphasize its versatility. In their opinion, the pattern works with equal efficiency on any trading instruments and at any time intervals. If in the first part this statement is undeniable, then with regard to timeframes, the use of the pattern raises many questions.
On short timeframes, this pattern is not effective due to the high content of "white noise" and which does not allow to clearly identify and build the boundaries of the pattern.
Over long periods of time, the created corridor is so wide that, in fact, it can only indicate the direction of the trend (and even then in the long term). Thus, the efficiency of using this figure very much depends on the correctly selected timeframe. The ideal timeframe for work is 4 hours-1 day.
Remember the most important thing, this 5-0 pattern is effective in areas of potential trend reversal.
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I wrote above that I will attach trading ideas for this pair that I worked on.
Which trading ideas made it possible to take profits in shorts + 8% and long + 55%.
1) This one worked in short when the head and shoulders formed. Published November 24th.
ETH / BTC Pivot Points . Ascending Triangle - Head and Shoulders
Result in short + 8%
2) The trading idea for which he worked in long. Published January 22.
ETH / BTC Coin operation. Reversal zones. Double bottom .
The result is now + 55%, the entrance was practically at the very minimum price when confirming support.
Perhaps we will see a reversal of the main trend by ETH18, if the price closes above the downtrend line (red line).
Also, in the idea of training on this graph, you probably all noticed which figure is being formed and how much you can earn from fulfilling its target.
Remember, trading is a game of probabilities.
Who trades from the situation created in the market - earns.
Who trades on the basis of what he wants - receives a loss.
The crowd trades out of their desires, not market probabilities. The crowd always loses.
From the pixels of thinking of individuals, a way of thinking of the crowd is created.
Thanks to the thinking and desires of the crowd, we earn.
The more stupid a society is, the higher the percentage of earnings in it is smart.
To earn, you need someone to lose money. No other way.
Under the article, I have fixed 31 learning ideas.
I didn’t even know that I already have so many of them.
Knowledge and experience are power!!!
Back Testing struture anf FibsThis was a backtesting example of how Fibonacci and Extension can add meaningful value to Technical Analysis
Harmonic Patterns on GOLD.Take look on the Harmonic Patterns on GOLD.
Shark - Gray
Crab - Orange
Butterfly - Yellow
Crab - Orange
Hartley - Green
Bat - Red
Cypher - Blue
