Nico.Muselle
Education

USDJPY - the Cypher pattern explained.

FX:USDJPY   U.S. Dollar/Japanese Yen
14084 29 60
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.
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What happens if the 0.786 is exceeded is the pattern a fail?
Reply
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 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 :)
Reply
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
where i cn find to learn these paterns,
i work witk trading view but a dont foun them
Reply
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!
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Thanks Nico, great explanation but How to get the X point?, Where and when the Cypher stars? thanks again ;)
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)
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amochoc TradeYodha
What role does the RSI play?
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