There are several EURO news events this morning (pmi´s and retail sales). Depending on whether they are favorable or unfavorable as a whole, we could have an opportunity to trade out of those news events with the reversal of an advanced price pattern that is nearing its completion on the 4H timeframe. Price is already testing the potential reversal zone and this set up qualifies as a “trade candidate” and goes on my watch list.
When defining the potential reversal zone (PRZ) for a Gartley pattern, we look at the projection of three harmonic levels. I: the 786 retracement of XA, II: an AB = CD pattern and III: a BC expansion converging in the same area (in this case 1272 BC). This defines a tight zone, about 26 pips wide, represented by the orange lines in the chart. Should price action reverse convincingly, I would enter long. SL goes 10 pips behind the next support level. TP1 = 382 retracement of AD and TP2 = 618 retracement of AD.
There are 220 pips to be made (if this pair follows the script) and the trade has a reward – risk ratio of 2.0!
Thank you all for responding; I appreciate it, exchanging views on trade setups is fun and an opportunity to learn from seeing how others perceive a particular setup. Let me give you my view. I am not saying this trade is a guaranteed winner and price will for sure reach the 135 handle, because I don’t “know” what the market will do.
What I did was recognise an opportunity (a Gartley pattern nearing its completion) that is worthwhile putting some risk on and I predefined and accept that risk. Harmonic patterns have a positive expectancy over a large number of trades when traded consistently to a number of pre-set rules. Whether they go with or against the trend.
Lets see how this one plays out!
IvanLabrie
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Indeed, better stick to your own rules like a robot...good way to stay consistent.
What I did was recognise an opportunity (a Gartley pattern nearing its completion) that is worthwhile putting some risk on and I predefined and accept that risk. Harmonic patterns have a positive expectancy over a large number of trades when traded consistently to a number of pre-set rules. Whether they go with or against the trend.
Lets see how this one plays out!