3 Trading Steps with Harmonic Price Pattern
You already know what is Harmonic Price Pattern along with its derivatives including ABCD and Three-Drive Pattern, Gartley, Crab, Bat, and Butterfly Pattern. Now is the time you know 3 important steps of forex trading with this indicator.
Three Steps of Forex Trading with Harmonic Price Pattern
- First, determine the location of the harmonic price pattern
- Second, measure the potential for harmonic price pattern
- Third, decide the position to be taken “Buy” or “Sell”
First Step, Determines the Location of the Harmonic Price Pattern
We take the example of price movements like the picture above, at first glance it could be ABCD pattern, Three-Drive Pattern or Gartley Pattern.
Second Step, Measure the Potential of Harmonic Price Pattern
Please use the Fibonacci tool by drawing a line from point A to point B, then automatically the trading software will measure correction points or retracement. And based on the tool it was found that,
- Price movement from point B to C (BC) value is 0.618 from price movement from point A to B (AB) -> Retracement
- Price movement from point C to D (CD) is 1,272 from price movements from point B to C (BC) -> Extension
- The length of the leg AB is equal to the length of the foot of the CD
Based on these findings it is certain that the pattern above is Bullish ABCD Pattern with a strong “Buy” signal.
Step Three, Decide on the Position to be Taken “Buy” or “Sell”
After we finish determining the type of Harmonic Price Pattern that is formed, the next important step is to respond with a “Buy” or “Sell” decision.
Because the indicator formed is Bullish ABCD Pattern, what we need to do is to install a Buy Order at point D which is the price movement extension from point B to C (BC) of 1,272.
Don’t forget to do risk management by placing a stop loss a few pips below point D.