How to Use the Cypher Pattern in a Cryptocurrency Chart

The Cypher pattern is an advanced harmonic pattern used to identify potential reversal points in the market. This pattern consists of five points (X, A, B, C, D) and four movements (XA, AB, BC, CD). Here’s how to identify and use this pattern in your cryptocurrency charts.

Steps to Identify the Cypher Pattern

Identify the Key Points:

Point X: The starting point of the pattern, marked by a significant swing high (for a bearish pattern) or a swing low (for a bullish pattern).

Point A: Represents a retracement of the initial movement (XA) by a specific Fibonacci level, typically 38.2% or 50%.

Point B: Marks a new swing high/low that exceeds point X.

Point C: Represents a retracement of the movement from B to A (AB) by a Fibonacci level, typically between 61.8% and 78.6%.

Point D: The endpoint of the pattern, where a reversal is expected to occur.

Draw the Legs of the Pattern:

XA: The first significant movement.

AB: A retracement of the XA movement.

BC: A retracement of the AB movement.

CD: The final movement that completes the pattern.

Using Fibonacci Levels

Fibonacci levels are essential for identifying the points of the Cypher pattern. Here are the key levels:

XA: Initial movement.

AB: Retracement of 38.2% to 50% of XA.

BC: Retracement of 61.8% to 78.6% of AB.

CD: Extension of 127.2% to 161.8% of BC.

Trading Strategy with the Cypher Pattern

Entry:

Enter a long position (buy) when the price reaches point D in a bullish pattern.

Enter a short position (sell) when the price reaches point D in a bearish pattern.

Stop-Loss:

Place a stop-loss just below point X in a bullish pattern.

Place a stop-loss just above point X in a bearish pattern.

Profit Target:

Use Fibonacci extension levels (1.618 of XA) to set your profit targets.