USDJPY - the Cypher pattern explained.

FX:USDJPY   U.S. Dollar/Japanese Yen
13635 29 59
A bearish Cypher pattern is forming on this popular currency pair. It may look a bit weird, but it all points from X to C lign up nicely for a cypher pattern formation. Whether it will complete or not, I wanted to use this opportunity to give an explanation on this pattern.

How do you recognize a cypher pattern ?

The Cypher pattern was discovered by Darren Oglesbee from Trade Empowered and I have been told that at some point this was the only pattern he traded, and was very succesful at it as well as these patterns have a high success rate. This is a so-called "extension pattern", where the impulse leg (XA) is not the longest leg of the pattern but the C point extends beyond A.

What are the criteria ?

B-point : should see a minimum of 0.382 retracement of XA and cannot close beyond the 0.618 extension of that same leg.

C-point : should reach at minimum the 1.272 extension of the XA leg and cannot close beyond the 1.414 extension of that leg.

D-point : lies at the 0.776 of the complete XC move. Ideally you would look for some previous structure as well.

Where do stops go ?

As with any Harmonic pattern , stops exceed X with a certain number of pips (fixed number or defined by ATR)

Profit targets ?

Traditional targets apply :
Target 1 : 0.382 retracement of CD leg
Target 2 : 0.618 retracement of CD leg

You will notice that the Risk/Reward ratio is not ideal here and barely reaches a 1:1, however since this pattern is so successful, with Target 2 often reached as well, it's definitely worth it. This pattern occurs in the market quite often, so learning how to recognize it is definitely to your advantage.

Hope this was useful !!! Leave your comments below.
You're correct, at one point he traded a 20 pair portfolio of only Cypher patterns. Then as Trade Empowered continued to grow, trading had to take the backseat to other administrative responsibilities.
+5 Reply
Way to go Darren, I'm really thankful for this particular pattern, I just love to trade it :)
Akil_Stokes PRO Nico.Muselle
And to think it all came from looking for something completely different
+2 Reply
MinervaFX Akil_Stokes
many famous scientists were looking for something different. tesla, einstein :D
+2 Reply
It takes a good mind to recognize you've stumbled upon something groundbreaking which clearly is the case here :)
+3 Reply
MinervaFX Nico.Muselle
Like many others I've tried to trade cypher's and mostly I've lost money for no reason. Until Akil explained in the workshop how to properly draw it. Now it looks fabulous. Thanx Darren, Akil, Jason ;)
+2 Reply
Very intrigued about Harmonics. Can U please suggest a book or an URL to get educated with? Thank you sir. - Riccardo
+2 Reply
Nico.Muselle MOD RiccardoAnnoni
The fundaments of harmonic patterns can be found in Scott M. Carney's books Harmonic Trading Vol1 & Vol2. For me personally that did not really cut it so I did a course organised by the company mentioned above. You can check their website, they have a course specific for advanced patterns amongst some other courses. Hope this helps !
+1 Reply
RiccardoAnnoni Nico.Muselle
Thank you Nico, I will defintely have a look!
+1 Reply
Nico.Muselle MOD RiccardoAnnoni
You are welcome. Let me know if you have any further questions !
nezyrinfx RiccardoAnnoni easiest way to learn harmonics. even had cheat sheet.
+1 Reply
Great site! THank you very much nezy!
Thank you for this explanation Nico, and thanks to the team at Trade empowered for the value that you have been creating with your educational material. To anyone wanting to get educated on the how to trade I would highly recommend joining The Syndicate with Jason and Akil.
+1 Reply
You are welcome ! :)
Pro trader course get my thumbs up, perfect for beginners to advanced and very well explained by Jason.
+1 Reply
dangap dangap
+1 Reply
I agree ... I did the same course :)
Hi Nico, do you also watch the news while trading patterns on 60 min, 240 min chart or you don't follow them?
+2 Reply
Of course I do, I'm always careful when news is due for the concerned currency pair. It could enforce the direction I predict the pair will go, but it can just as well have the opposite effect. If news is coming up during a running trade, I tend to put my stop loss at least on break even to minimize eventual damages.
+1 Reply
Nico, I have this analysis. I think it partly coincides with your idea. Is it H&S forming?
#USDJPY Short Idea (Structure, Fibonacci, Head and Shoulders)
amochoc TradeYodha
What role does the RSI play?
Thanks Nico, great explanation but How to get the X point?, Where and when the Cypher stars? thanks again ;)
hey guys! I'm Adrian and I'm posting on tradingview for the first time. I have a question about the initial move( XA move). Do we need an impulse XA (braking structure) or simply an anchor XA for the cypher pattern? thank you guys. Akil Stokes, you're the best!
where i cn find to learn these paterns,
i work witk trading view but a dont foun them
Great exlanation.

This is what I have to add to it.

Completion is at 0,786 rather than 0,776. Minor difference but anyway...

When I trade it I use a Fibonacci inversion of X-A and set stops at 1,13.

I love this pattern and the Mighty Akil Stokes thought it to me.... (I am a 12 week transformation graduate, and a live room member). This is the only pattern I trade at the moment, and it kills!

Thanks to Darren for recognizing this awesome advanced pattern,
+1 Reply
Nico.Muselle MOD johan.larsson
You are absolutely correct, on the chart it was indicated correctly, but a typo slipped into the explanation and there is no possibility to correct it I'm afraid :)
I learned it from the same master ... hehe
+1 Reply
johan.larsson PRO Nico.Muselle
Hey man, I didn´t mean to be rude at all. I liked you explanation and linked to it. I got a question on one of my ideas about the Cypher. I was too lazy to write it all out so I searched, and found yours.
Take care :)
Nico.Muselle MOD johan.larsson
No worries, no offence was taken and I appreciate your support ! And indeed, it is a great pattern ! :)
+1 Reply
What happens if the 0.786 is exceeded is the pattern a fail?
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