The AB=CD pattern is a popular harmonic pattern used in technical analysis to predict potential price movements in financial markets, particularly in forex and stocks. It consists of four points: A, B, C, and D.
- The pattern starts with a strong price move (AB leg).
- This is followed by a correction (BC leg), which usually retraces a significant portion of the AB leg.
- Next comes another price move in the direction of the original trend (CD leg), which mirrors the AB leg in terms of price and time.
When the CD leg completes at point D, traders often anticipate a reversal or a significant change in the trend direction. The bullish AB=CD pattern suggests a potential buying opportunity, as it indicates that the market may reverse higher after the completion of the pattern.
However, like any technical analysis tool, the AB=CD pattern is not foolproof and should be used in conjunction with other indicators and analysis methods for confirmation. It's essential to consider factors such as market context, fundamental analysis, and risk management when making trading decisions based on patterns like AB=CD.
- The pattern starts with a strong price move (AB leg).
- This is followed by a correction (BC leg), which usually retraces a significant portion of the AB leg.
- Next comes another price move in the direction of the original trend (CD leg), which mirrors the AB leg in terms of price and time.
When the CD leg completes at point D, traders often anticipate a reversal or a significant change in the trend direction. The bullish AB=CD pattern suggests a potential buying opportunity, as it indicates that the market may reverse higher after the completion of the pattern.
However, like any technical analysis tool, the AB=CD pattern is not foolproof and should be used in conjunction with other indicators and analysis methods for confirmation. It's essential to consider factors such as market context, fundamental analysis, and risk management when making trading decisions based on patterns like AB=CD.