Is the market hard to trade? Is the capital evaporating? Is the mindset exploding? Learn (harmonic trading) head-on!!!
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In technical analysis of financial markets, harmonic patterns are a price structure analysis method based on the Fibonacci sequence. These patterns help traders predict future price movements by identifying specific points and proportional relationships on market price charts. Harmonic patterns emphasize the periodicity and symmetry of market prices and provide relatively accurate buy and sell signals.
This article will detail four common harmonic patterns: Butterfly Pattern, Bat Pattern, Crab Pattern, and Shark (Gartley) Pattern. Each pattern has its unique structure and Fibonacci retracement and extension ratios. We will focus on analyzing the key points (X, A, B, C, D) of each pattern and the related Fibonacci ratios, especially the values of AC, XD, XB, and BD. These values are key to identifying and confirming harmonic patterns, and understanding them can help traders better grasp market dynamics and make more informed trading decisions.
Without further ado, here’s a brief description of the detailed Fibonacci retracement and extension values for each segment of the four harmonic patterns:
1. Butterfly Pattern
AC Value: 0.618 or 0.786
XD Value: 1.27 or 1.618
XB Value: 0.786
BD Value: 1.618
2. Bat Pattern
AC Value: 0.382 or 0.50
XD Value: 0.886
XB Value: 0.382 or 0.50
BD Value: 1.618 or 2.618
3. Crab Pattern
AC Value: 0.382 or 0.886
XD Value: 1.618 or 2.618
XB Value: 0.382 or 0.618
BD Value: 2.618 or 3.618
4. Gartley Pattern
AC Value: 0.382 or 0.886
XD Value: 1.13 or 1.618
XB Value: 0.618
BD Value: 1.13 or 1.618
Is the text difficult to understand? Just look at the pictures:
⭐⭐⭐⭐⭐ Five-star warning! Conditions need to be stated upfront, the real harmonic pattern trading opportunities actually occur at point D. Moreover, harmonic trading belongs to counter-trend trading, so risk control must be well executed!
What does bullish mean? It must be after completing the drop to point D to see potential reversals.
However, most friends are accustomed to entering trades at point C. While this is not a big issue, the entire CD segment is actually a very long trading range. Until the reversal at point D is completed, we cannot know whether this complete structure can be completed.
So if you lose money trading at point C, don't come to me and say, “M brother, you are a scammer 🤬,” because that would make me very sad.
1. Butterfly Pattern
Butterfly Pattern
AC Value: 0.618 or 0.786
XD Value: 1.27 or 1.618
XB Value: 0.786
BD Value: 1.618
2. Bat Pattern
Bat Pattern
AC Value: 0.382 or 0.50
XD Value: 0.886
XB Value: 0.382 or 0.50
BD Value: 1.618 or 2.618
3. Gartley Pattern
Gartley Pattern
AC Value: 0.382 or 0.886
XD Value: 1.13 or 1.618
XB Value: 0.618
BD Value: 1.13 or 1.618
4. Crab Pattern
Crab Pattern
AC Value: 0.382 or 0.886
XD Value: 1.618 or 2.618
XB Value: 0.382 or 0.618
BD Value: 2.618 or 3.618
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Summary:
Advantages:
Capture reversal opportunities: Harmonic trading patterns provide opportunities to enter trades when market reversal signals appear, helping to capture potential profits from price reversals.
Strict pattern rules: Each harmonic pattern has a clear structural and proportional requirement, allowing traders to relatively reliably identify and confirm these reversal signals.
Combining with Fibonacci tools: Harmonic patterns are often used in conjunction with Fibonacci retracement and extension levels, enhancing the verification of the patterns and the reliability of trading signals.
Disadvantages:
Challenges of market trends: The counter-trend nature of harmonic trading patterns means they may conflict with the current market trend, and when the market trend is strong, the reversal signals of the patterns may be suppressed by the market trend.
Subjectivity in pattern recognition: There may be certain subjectivity and interpretability in the process of recognizing and confirming harmonic patterns, so it is necessary to combine with other market analysis tools for verification and confirmation.
In summary, harmonic trading patterns, as a counter-trend trading strategy, can provide traders with trading opportunities when the market reverses through their clear structural patterns and support from Fibonacci tools, but it is also necessary to pay attention to their limitations in market trends and pattern recognition.
Author: Manson
