USDJPY BULLISH ADVANCE HARMONICAS PATTERN
USDJPY has formed an advance harmonics pattern on its hourly chart.
The price is trading above the EL: 131.209.
ST: 130.517.
Targets:
38% AD: 133.350
50% AD: 134.222
62% AD: 135.093
The price is trading above the EL: 131.209.
ST: 130.517.
Targets:
38% AD: 133.350
50% AD: 134.222
62% AD: 135.093
Comment:
Comment:
The AB=CD pattern is first described by H.M. Gartley in his book
'Profits in the Stock Market.' (1935).
The AB=CD Chart pattern is a prime example of 'Symmetry' in the markets. These patterns help traders to identify buying and selling opportunities in all markets and in all time-frames.
The AB=CD patterns are reversal patterns and are shaped like a lightning bolt.
The main advantages of trading AB=CD or harmonic patterns are that they allow traders to determine risk vs. reward ratios beforehand as they forecast key market turning points and profit targets for traders.
Identification
The key point in identifying an AB=CD pattern is to correctly identifying the A, B, and C key inflection points in a chart while they are forming. These inflection points are determined from key swing highs and lows of various levels, and for its correction waves to determine distinct 'swings·. The potential C point is usually forecasted by the fib. retracements (0.50 to 0.78.6) of AB Swing. Once A, B, and C points (and AB, BC, CD legs) are identified, a projection algorithm is applied to compute the confluence levels to build a Potential Completion Zone (PCZ).
The PCZ area is where pattern is expected to complete and signal reversal of its trend in opposite direction. Following the completion of BC leg, the projections of AB and BC legs (using fib. ratios) are plotted (from C) to generate a PCZ level to find D point. Once 'D' point is identified, AB=CD pattern is complete.
Conditions:
The swing legs in AB=CD pattern generally are symmetrical in both price and time with consistent slopes. The CD leg has harmonic relation and symmetry with AB leg BC swings. The AB=BC bullish structures are formed after a prolong prior down trend or consolidation trends, whereas bearish AB=CD patterns are formed after a prior uptrend.
How to Trade:
Build a confluence area of AB and CD projection legs (like 78-127%AB, 127-162%BC) to identify a PCZ (Price completion zones) for a reversal. It is wise to wait for the pattern to complete and confirm a reversal signal using any momentum-based indicator or price confirmation mechanisms. I use various confirmation and trade entry methods but one of the methods is price crossing 2-bar high after 'D' together with Fibonacci as an EL ( Entry Level) in AB=CD Bullish pattern or a 2-bar low after 'D' in conjunction with ( Entry Level) in AB=CD bearish pattern.
TRADE CHARTS PATTERNS LIKE THE PROS
5 GOLDEN RULES
1: The Trade Setup
The setup is the basic conditions that need to be present in order to even consider a trade. For example, if you're a charts patterns trader, then a pattern needs to be present. Your trading plan should define what a tradable chart pattern is (for your strategy). This will help you avoid trading when a chart pattern isn't there. Think of the "setup" as your reason for trading.
2: The Trade Trigger
If your reason for trading is present, you still need a precise event that tells you now is the time to trade
There are various methos using a trigger.
A Price action
B Moving averages
C Fibonacci
D 2 bar low/high
3: The Stop Loss
Having the right conditions for entry and knowing your trade trigger isn't enough to produce a good trade. The risk on that trade must also be managed with a stop-loss order. There are multiple ways to place a stop loss. For long trades, a stop loss is often placed just slightly below a recent swing low and for a short trade just slightly above a recent swing high.
Step 4: The Price Target
You now know that conditions are favourable for a trade, as well as where the entry point and stop loss will go. Next, consider the profit potential.
A profit target is based on something measurable and not just randomly chosen. Chart patterns, for example, provide targets based on the size of the pattern. Trend channels show where the price has had a tendency to reverse; if buying near the bottom of the channel, set a price target near the top of the channel.
5: The Reward-to-Risk
Strive to take trades only where the profit potential is greater than 1.5 times the risk. For example, losing $100 if the price reaches your stop loss means you should be making $150 or more if the target price is reached.
Other Considerations
The five-step test acts as a filter so that you're only taking trades that align with your strategy, ensuring that these trades provide good profit potential relative to the risk. Add in other steps to suit your trading style. For example, day traders may wish to avoid taking positions right before major economic numbers or a company's earnings are released. In this case, to take a trade, check the economic calendar and make sure no such events are scheduled for while you're likely to be in the trade.
The Bottom Line
Make sure conditions are suitable for trading a particular strategy. Set a trigger that tells you now is the time to act. Set a stop loss and target, and then determine if the reward outweighs the risk. If it does, take the trade; if it doesn't, look for a better opportunity. Consider other factors that may affect your trading, and implement additional steps if require.
'Profits in the Stock Market.' (1935).
The AB=CD Chart pattern is a prime example of 'Symmetry' in the markets. These patterns help traders to identify buying and selling opportunities in all markets and in all time-frames.
The AB=CD patterns are reversal patterns and are shaped like a lightning bolt.
The main advantages of trading AB=CD or harmonic patterns are that they allow traders to determine risk vs. reward ratios beforehand as they forecast key market turning points and profit targets for traders.
Identification
The key point in identifying an AB=CD pattern is to correctly identifying the A, B, and C key inflection points in a chart while they are forming. These inflection points are determined from key swing highs and lows of various levels, and for its correction waves to determine distinct 'swings·. The potential C point is usually forecasted by the fib. retracements (0.50 to 0.78.6) of AB Swing. Once A, B, and C points (and AB, BC, CD legs) are identified, a projection algorithm is applied to compute the confluence levels to build a Potential Completion Zone (PCZ).
The PCZ area is where pattern is expected to complete and signal reversal of its trend in opposite direction. Following the completion of BC leg, the projections of AB and BC legs (using fib. ratios) are plotted (from C) to generate a PCZ level to find D point. Once 'D' point is identified, AB=CD pattern is complete.
Conditions:
The swing legs in AB=CD pattern generally are symmetrical in both price and time with consistent slopes. The CD leg has harmonic relation and symmetry with AB leg BC swings. The AB=BC bullish structures are formed after a prolong prior down trend or consolidation trends, whereas bearish AB=CD patterns are formed after a prior uptrend.
How to Trade:
Build a confluence area of AB and CD projection legs (like 78-127%AB, 127-162%BC) to identify a PCZ (Price completion zones) for a reversal. It is wise to wait for the pattern to complete and confirm a reversal signal using any momentum-based indicator or price confirmation mechanisms. I use various confirmation and trade entry methods but one of the methods is price crossing 2-bar high after 'D' together with Fibonacci as an EL ( Entry Level) in AB=CD Bullish pattern or a 2-bar low after 'D' in conjunction with ( Entry Level) in AB=CD bearish pattern.
TRADE CHARTS PATTERNS LIKE THE PROS
5 GOLDEN RULES
1: The Trade Setup
The setup is the basic conditions that need to be present in order to even consider a trade. For example, if you're a charts patterns trader, then a pattern needs to be present. Your trading plan should define what a tradable chart pattern is (for your strategy). This will help you avoid trading when a chart pattern isn't there. Think of the "setup" as your reason for trading.
2: The Trade Trigger
If your reason for trading is present, you still need a precise event that tells you now is the time to trade
There are various methos using a trigger.
A Price action
B Moving averages
C Fibonacci
D 2 bar low/high
3: The Stop Loss
Having the right conditions for entry and knowing your trade trigger isn't enough to produce a good trade. The risk on that trade must also be managed with a stop-loss order. There are multiple ways to place a stop loss. For long trades, a stop loss is often placed just slightly below a recent swing low and for a short trade just slightly above a recent swing high.
Step 4: The Price Target
You now know that conditions are favourable for a trade, as well as where the entry point and stop loss will go. Next, consider the profit potential.
A profit target is based on something measurable and not just randomly chosen. Chart patterns, for example, provide targets based on the size of the pattern. Trend channels show where the price has had a tendency to reverse; if buying near the bottom of the channel, set a price target near the top of the channel.
5: The Reward-to-Risk
Strive to take trades only where the profit potential is greater than 1.5 times the risk. For example, losing $100 if the price reaches your stop loss means you should be making $150 or more if the target price is reached.
Other Considerations
The five-step test acts as a filter so that you're only taking trades that align with your strategy, ensuring that these trades provide good profit potential relative to the risk. Add in other steps to suit your trading style. For example, day traders may wish to avoid taking positions right before major economic numbers or a company's earnings are released. In this case, to take a trade, check the economic calendar and make sure no such events are scheduled for while you're likely to be in the trade.
The Bottom Line
Make sure conditions are suitable for trading a particular strategy. Set a trigger that tells you now is the time to act. Set a stop loss and target, and then determine if the reward outweighs the risk. If it does, take the trade; if it doesn't, look for a better opportunity. Consider other factors that may affect your trading, and implement additional steps if require.