Entry i Butterfly's D point - 127.2% of XA, confimed by 161.8% of small correction. Not so much confirmation - we all know it is game :)
And couple of facts about Butterfly:
- The general extension structure of the was discovered by Bryce Gilmore. However, the exact alignment of ratios was defined in Scott Carney's 1998 book, "The Trader." This has become the industry standard for the structure.
- Scott's ideal requires specific Fibonacci ratios to validate the structure. These measurements include a mandatory of the XA leg at the B point, which defines a more precise Potential Reversal Zone (PRZ) and more significant trading opportunities.
- The must include an pattern to be a valid signal. Frequently, the pattern will possess an extended CD leg that is 1.27 or 1.618 of the AB leg.
- Although this is an important requirement for a valid trade signal, the most critical number in the pattern is the 1.27 XA leg.
- The XA calculation is usually complemented by an extreme (2.00, 2.24, 2.618) BC projection. These numbers create a specific Potential Reversal Zone (PRZ) that can yield powerful reversals, especially when the pattern is in all-time (new highs/new lows) price levels.