How To Trade Forex With Harmonic Pattern Shark
The Shark Harmonic Pattern offers a simple way of trading, which identifies an important Support or Resistance location with Fibonacci Retracement.
If you follow some analysis in Seputarforex, surely you will find some terms related to the harmonic pattern as a technical guide. From the simplest way of trading harmonic patterns like ABCD to Gartley and friends, all offer high trading signal accuracy. Almost all of these patterns have been discussed, but there is still a unique pattern that has not been revealed. Now, turn the Shark Harmonic pattern that we will peel.
Well, from the name alone it sounds fierce. What kind of hell is this pattern? For information, Shark harmonic patterns are able to generate profits aggressively if you are able to recognize when this signal appears on the chart.
Understanding the Harmonic Pattern Shark
The Shark Harmonic Pattern was first introduced by Scott M. Carney (a professional stock trader) in his book entitled “Harmonic Trading” in 2010. Visually, the pattern looks similar to the Cypher Pattern; the highest and lowest points are always higher than the previous peaks and valleys.
The difference is that the harmonic pattern of Shark starts from point 0, while the pattern of Cypher starts from point A. The five points of this reversal pattern form the candidate frame pattern 5-0 (0, X, A, B, C, D). Next, Shark Pattern’s last leg (BC) looks longer because it is pulled from the 131% extension of the first leg (0X).
The essence of the Shark harmonic pattern is its accuracy to detect the level of Resistance or Support key from the starting point (0) to point C. The price will visit that important level with a strong prediction that the movement will bounce in the opposite direction.
Before attempting to trade with signals from harmonic patterns, you must recognize the formation first on the chart. It’s basically the same as recognizing the price pattern (Chart Pattern), but here you need the Fibonacci tool to measure the length of each leg in this reversal pattern.
The legs of the pattern are useful to know at what level the price will start reversing direction from the lowest or highest point. So, you can specify where the trading position will be opened, plus when the position can be closed to realize the profit.
Here are the measurements of Shark Bearish harmonic legs through the Fibonacci Retracement and Extension lines.
- The 0X leg is the first leg and is pulled from the first Swing High (from top to bottom).
- The XA leg is a 38.2% up to 61.8% retracement of the 0X leg.
- The AB line is drawn from the Fibonacci Extension by 113% to 161.8% of the XA line.
- The length of BC line is Fibonacci Extension 113% of first line, 0X.
As for its Bullish version, the 0X leg is pulled from the first Swing Low (from bottom to top). The rest, the Retracement and Extension rules are exactly the same.
Like any other way of trading harmonic patterns, the above ground rules must be adhered to ensure that the signal quality is maintained for accuracy.
How to Trading Harmonic Patterns Shark
Trading with harmonic patterns can actually be done on any timeframe, as long as price movements meet the Retracement and Extension requirements specified above. If you are just learning to use harmonic patterns, it is advisable to use a high timeframe like H4 or Daily first, to avoid the risk of false signals at low price noise at timeframe.
There are several methods for setting up Stop Loss on Shark harmonic patterns. First, you can use the Risk / Reward ratio to determine the SL distance from the opening. Secondly, use Fibonacci Extension 1.15 from the 0X foot as the SL benchmark. If the price has moved the extension before, then this harmonic signal pattern is invalid.
What about the Bullish version? Almost the same, the difference this time the price expectations will climb up to Fibonacci retracement 50% – 61.8% of the legs 0X. The Shark Bullish harmonic trading mode is looking for the best Buy opportunity when the price has touched an important Support point.
Advantages And Disadvantages Of Harmonic Patterns Shark
Like the harmonic pattern in general, this pattern provides many advantages as well as limitations to consider before testing its trading. Among others are as follows:
- Accurate: able to highlight important Resistance and Support levels with high potential to reverse direction.
- Flexible: can be used on any kind of timeframe and pair anywhere.
- Simple: You do not need heaps of indicators or complicated calculations to determine the opening and closing points of positions. You only need to use Fibonacci Retracement to identify the location of each of its essential points.
- Subjective: the accuracy of the signal may vary if you do not keep the formation rules at each point. This is common when traders insist on trading signals.
- Rarely appears: these reversal pattern formations are relatively rarely formed at high timeframes. Usually the price moves beyond Retracement or Extension rules.
The advantages can be maximized and the shortcomings can be reduced if you adhere to the discipline of Entry and Exit in the way of trading with Shark harmonic patterns. Also, use Money Management appropriately to retain profits and reduce the risk of loss.
In the experience of professional traders, there are many other ways of trading harmonious patterns other profitable. For example, the Gartley harmonic pattern, which is more common than Shark and its accuracy can also be trusted to detect important Support and Resistance points.