A Guide To Harmonic Trading Patterns
This is one of the harder topics, but if you are persistent enough to learn this type of analysis, the result would pay for the effort. The harmonic Shark pattern differentiates itself from the other harmonic patterns by its five points setup being labeled as , X, A, B, C. Also, the termination point of leg B ends above wave X. It extends to a minimum of 1.13 and a maximum of 1.618 Fibonacci ratios.
Retracements are vexing at all times and any help is always welcome, although with harmonic price patterns, the orthodoxy is to apply Fibonacci numbers Again, Fibonacci numbers are not a proven theory and in fact there is a great deal of evidence that Fibonacci numbers appear in securities prices, including Forex, only about the number of times as chance would allow.
A long position should be opened when vertex D is on the upper side of C. Even if the market prices haven't hit the price level of vertex C, and D is above C, do not be tempted to place sell for the price to hit C and then close it to place the buy towards D. The best thing to do at such a case is to keep off from opening any trade until the prices first hit the level of vertex C.
The reason why we use two possible TP zones is because in essence, the Shark pattern leads to the 5-0 pattern (see Figure above) and once we reach the D point it can reverse, however, the Shark pattern can be a reversal pattern in itself and that's why we're using as a second target the 100% Fibonacci ratio.
Like all trading concepts based on Fibonacci numbers, harmonic pattern identification takes a lot of practice and a lot of re-drawing and re-calculation, since the numbers so seldom hit exactly where they are supposed to. However, a focus on retracements can be helpful in improving trading performance, since retracements are where most losses are clustered.
These patterns represent price structures that contain combinations of distinct and consecutive Fibonacci retracements and projections If we calculate various Fibonacci aspects of a specific price structure, we can identify harmonic pattern areas that will hint at potential turning points in price action.
Not too many people trade harmonics because they haven't been available to the mass public for a long time, but once you discover harmonic trading and start profiting from just putting harmonic patterns on your charts, you will realize that this is, in fact, a very nice way to even day trade on the string trade.
CD: The last price move is opposite to BC and it should be 224% (extension) of BC move if BC is 38.2% of AB. If BC is 88.6% of AB, then CD should 361.80% (extension) of BC. This article will discuss some of the different types of Forex trading strategies that are currently in the Forex market and teach you how to identify what makes the best FX trading system.
When you are drawing the Fibonacci ratios on your charts, the waves of the patterns have to hit the specified Fibonacci ratios for the pattern to be complete. The shape of bullish butterfly is not unlike the bullish Gartley pattern. It is designed to trade tops and bottoms of markets and can also be used in trend continuation by buying dips in upward trends, and selling peaks in downtrends.
Before we delve deeper into the Shark pattern harmonic trading strategy, let's look at the indicators needed to successfully trade this strategy. The Bat, like the Gartley, is regarded as a retracement pattern within the group of harmonic patterns. Now, below a Fibonacci extension of 161.8% of the XA leg, stop loss can be placed.
Yep, a buddy of mine turned me on to harmonic trading about 3 mos. 07, 2014) forming a Bullish Crab pattern above 200-SMA and outside the Fibonacci Bands (A, C points) and a D forex harmonic patterns point is formed near the lower Fibonacci Bands with Crab pattern. You just have to practice and then you will see the patterns and it will be very easy for you to trade them.