THE IMPULSE LEG
A impulse leg is a strong move in price action to the upside.
The impulse leg can be a mixture of and candles, but must have a overall direction.
The start of the impulse leg should be marked as X and the top of the impulse leg should be marked as A.
B LEG RETRACEMENT
Now that you have identified your X to A impulse leg you are now looking for the B leg, which is a retracement of the X to A impulse leg.
Take your tool and draw from your X leg to your A leg.
The crucial Fibonacci levels you are looking for are the 38.20% and 61.80%
Price action must at least touch the 38.20% retracement but cannot close below the 61.80% retracement.
As you can see by the illustration, the candle does not need to close below the 38.20% retracement but must at least spike through.
The pattern will be invalid if price action closes below the 61.80% retracement of the X to A move.
C LEG EXTENSION
Once you have identified a valid X to A impulse leg and a B leg retracement,
you are now looking for a valid C leg extension.
Take your tool and draw from X to A and then back to X.
The crucial levels you are looking for are the 127.20% and the 141.40%
Price action must at least touch the 1.272% but cannot close above the 1.414%.
As you can see by the illustration the candle does not need to close above the 127.20% but must at least spike through.
The pattern will be invalid if price action closed above the 1.414%
D LEG COMPLETION
Now that you have a valid X, A, B and C move you are looking for the final leg in price action at which point you will buy the chosen currency pair.
Take your tool and draw from your X leg to your C leg.
You are looking for a 78.60% which will now give you a valid D leg completion of the pattern.
PLACING YOUR TARGETS
When looking to take targets on the Pattern the first step is to use your tool.
With your tool draw from the C to D leg, you are looking for target 1 at the 38.20% and target 2 at the 61.80%.
To protect the profits you have accumulated at target 1 it is advised you move your stop loss to breakeven once the 38.20% target 1 has been attained, thus giving you a risk free trade to target 2.
KEY NOTES & RULES:
When trading the pattern , the pattern is meant to be traded at 78.60% D leg completion only.
If you believe the pattern is unfolding but price is only at point B, be patient and wait until price reaches the D leg completion.
The power of the pattern comes from converging Fibonacci levels of all points from X to D.
Point B must at least touch the 38.20% retracement but cannot close below the 61.80% from the X to A move.
Point C must touch the 127.20% but cannot close above the 141.4%
Point D is complete when price action touches the 78.60% retracement of the X to C move.
Stop loss must be placed below the X leg .
Target 1 at the 38.20% retracement of the C to D move.
Target 2 at the 61.80% retracement of the C to D move.
This pattern like any other is more profitable with certain currency pairs, you should do your own back testing on this before trading this or any pattern.
Please note I am only providing my own trading information for your benefit and insight to my trading techniques, you should do your own due diligence and not take this information as a trade signal.
Also very important. If price goes beyond 0,786XC then the target should be calculated as the retracement from C-point to whatever price is beyond 78.6. It means that the pattern requires active target management until price gives a factual reversal (even if it reverses 1 pip away from X-point). That's why cypher usually gives you inverted risk to reward (first target)
Also very important that you take some profits at 0.382CD, not only breakeven the trades. If take some profits at 38.2 then the accuracy of cypher is 70-75%. Doing so you can trade large portfolios of 15-20 pairs. In this case your largest drawdown will not be very big (not more than 6 losers in a row according to my research). But if you only take the target of 61,8 then the accuracy of the pattterns lowers all the way down to 55%. Trading large protfolio in this case is not recommended unless you can withstand large drawdowns (up to 12 losers in a row according to my research)
I don't want you to rely on my words only and do a research of cyphers on your own. If you do it, hopefully you will realize that knowing the ratios only is NOT enough for succesful trading of the pattern.
Don't be timid to contact me in Private Messages if you have some questions about the reseach work.
What I would like to see in this post is that you show some respect to the founder of Cypher explaining the pattern correct way. This means explain the way Darren, Akil and Jason trade it, but not the way you personally trade it. If you found your own way to trade it then it is your own strategy. Call it somehow else but not Cypher.
See what I mean?
I am more than happy to give credit to anyone, i will take no credit at all.
Secondly, are you even aware of where i have had my information from?
Third, i posted my verified results above showing that i profit with my setups, i am not saying that this is the only way to trade.
If you want to get into the details on a private message then i am more than happy to do so.
As far as the targets is concerned, there is some advice on what targets to take, namely the 38.2 and 61.8% retracements of the pattern. How you decided your targets (entry on the 78.6% retracement and exact retracement from there) or wait till you see the reversal and use that as the length of the move is a personal decision. Whatever you backtest and works best for you is valid.
That is the beauty of this platform, we can share ideas on how to trade, best practices (from our own experience) but there is no "one right way" to trade ... A pattern is indeed defined by some rules, if you want to interpret them differently, that's totally up to you, whatever works. And that should also be the message to the people reading this post. If you want to trade a certain setup, test it and see if and how it can work for you.
Keep the good spirit, and do not pay attention to such words. :)
thank you in advance