Easy Forex Trading With Harmonic Patterns, No Counts Need Complex
Actually there are easy trading methods with harmonic patterns, do not need complex count or check the validity of the patterns one by one. The shortcuts are taught in this article.
Trading with harmonic patterns does promise high signal accuracy. But for beginners, the process of pattern identification and execution Order based on the terms harmonic formation can be quite complicated. If you also experience it, then no need to worry anymore, because this article will explore how easy trading with harmonic patterns, through the help of some simple tools.
How To Easily Identify Harmonic Patterns On Chart
The biggest problem in recognizing harmonic pattern formations lies in its complexity to measure the position of each point using Fibonacci Retracement. Each Fibonacci pattern (another name of Harmonic pattern) has its own formation requirements, while memorizing one pattern alone is already a challenge for beginners.
As a reminder, there are 6 kinds of harmonic patterns of the most popular, namely; Gartley, Bat, Butterfly, Crab, Cypher and Shark. The six patterns both provide reversal signal with a relatively high degree of accuracy.
Actually, there is an easy way of trading harmonic patterns by following these steps:
1. Find a price pattern with shapes like the letters “M” or “W” on the chart.
This first step can be easily done if you are familiar with technical analysis techniques using Price Action.
2. Drag the Retracement line on the first Swing using the Fibonacci tool.
It should be noted, Retracement is the main requirement in the formation of Fibonacci pattern, if this condition is not met, then the accuracy of the signal can be said to be invalid.
The acceptable range of Retracement is between 38.2% to 78.6% of the first Swing. Below or above that range, the pattern can not be used.
3. Continue to get the basic pattern “ABCD”.
The basic pattern of ABCD is the basic foundation of easy trading of harmonic patterns. New Fibonacci pattern can be practically complete or can ditradingkan when the pattern in the form of “parallelogram” is formed.
In the pattern of Cypher, this unique pattern has characteristic ABCD that has formed from the first Swing. In contrast to the Crab, Butterfly, Gartley, and Bat patterns whose ABCD pattern was only confirmed in the last Swing.
If the ABCD pattern does not form at all from point X to D (Swing initial to end), then the signal harmonic pattern is invalid, except on the Shark pattern. The Fibonacci Shark pattern gets special treatment because it often does not contain the ABCD pattern at all.
4. Classify the requirements of the Retracement to conical to one of the harmonic patterns.
The Cypher pattern is easily distinguished by its uniqueness, ie the formation of the ABCD pattern at the beginning of the Swing, and the point A (Fibonacci Extension 133%) is more prominent than the point C. Furthermore, there are 5 other harmonic patterns to be classified based on visual characteristics and the Retracement conditions.
From visual cues, you can notice how harmonic patterns form “canals” during the formation fulfillment process. Shark pattern has a uniqueness with a wide channel shape. Conversely, if the channel narrows, it can possibly be pursed into the Gartley Fibonacci pattern or Bat. Whereas if the channel is almost parallel, it may be classified into Crab, Butterfly or Cypher pattern.
Next, we return to the second step to identify more specific patterns. Here are the specification criteria:
If the channel is aligned and the first foot Retracement is in the range 38% to 61.8%, the pattern is potentially a valid Crab pattern.
If the channel is aligned and the first Retracement> 61.8% and <78.6%, then its potential is the harmonic pattern of the Butterfly.
Visually, the Cypher pattern canal reverses from the Crab / Butterfly pattern channel. For example, in the Bearish Crab / Butterfly pattern, the channel will sideways upward, but on the Cypher pattern the channel sideways downward. Vice versa, if the signal is bullish.
When the channel is narrowed and the first Swing Swing in the range of 38% to 50%, most likely is the Bat pattern.
Channel narrows and first Retracement> 50% and <61.8%. Potentially a Gartley harmonic pattern.
5. Confirm the potential for harmonic pattern formation.
After conical to one of the harmonic patterns, confirm its accuracy by checking all the requirements for forming the corresponding Fibonacci pattern. If the conditions are not met, the validity needs to be questioned.
For example, you have found a price pattern such as the letter “W” with the channel widened, so the price potentially form the Shark pattern. But after being checked according to the terms of the Fibonacci Shark pattern, the pattern does not meet the criteria. If it is so, then the easy trading step harmonic pattern is not valid.
6. Repeat steps 1 through 5 as necessary until you get the formation of a valid harmonic pattern.
Maybe at first you still not so smoothly follow the easy trading steps harmonic patterns above. But over time, you will begin to feel the difference. No need to rely on rote, no need to spend time checking harmonic patterns one by one, and more importantly, you can instantly detect valuable trading opportunities.
Easy Trading Tips Harmonic Patterns
If you are familiar with the formation of harmonic pattern formation, that alone can be the main weapon to detect the best trading opportunities. It’s just that, if you want consistent profit, you should also consider the risk management (Money Management).
The main purpose of Money Management is to manage the risk that is ready to bear if the price moves beyond expectations, even if the trading signal already looks valid and convincing.
Once the Cypher Bearish pattern is confirmed in accordance with the Retracement terms, you can open a Short position (sell) with Stop Loss a few pip near point X as the Resistance key.
The Stop Loss distance from Entry is approximately 700 points or 70 pips. With Position Sizing (part of Money Management), you will measure the amount of Lot (volume) based on SL distance so that the total is no more than the risk that is ready to bear. For example, the current capital is USD 1,000 and the risk is 3% (USD 30), then the Lot to be used is 0.043 on Standard account.
Next, to determine the profit target, use the Risk / Reward ratio to taste. Generally, a trader uses a 1: 2 ratio so that profits are always greater than potential risks. So if the previous SL is pegged 70 pips, then the target profit must be at least 2 times (140 pips).
So how to trade easily harmonic patterns, practice the above steps on a demo account until you are sure about the results.
In addition to harmonic patterns, there are actually also price patterns that are able to provide trading signals. Pattern patterns or Chart Pattern are arguably easier to use because their formations are recognizable to the naked eye without the help of any tool. For those of you who do not understand and want to ask directly to experienced traders