THE CYPHER PATTERN
The cypher is a five point harmonic chart pattern, made up of points XABCD. The cypher is easy to spot on a chart because it has a characteristic wave like appearance displaying either rising peaks or falling valleys.
You can trade the cypher like other harmonic patterns, by waiting for a reversal at the final point and then using pending orders to profit from any potential breakout.
Bullish, Bearish Cypher Patterns
In any cypher, points X, C and D are the critical points. For a bullish cypher, X should be the pattern low and C the pattern high. A bearish cypher makes its high at X and its low at C.
In the bullish cypher, the points A and C should make successively higher highs and point D must be above X. In the bearish cypher points A and C must make successively lower lows and point D should be below X
The reversal is expected at point D, the final point in the pattern.
To validate a cypher check that
AC retraces 38%-62% of XA
BC retraces 113%-141% of XA
AD retraces 78% of XA
Always allow a tolerance of a few percent around these numbers as they will rarely be exact.
The cypher has a slightly different appearance to the butterfly, bat and gartley. In a cypher, C makes a stronger rebound beyond A and that gives the appearance of rising peaks in the bullish cypher and falling valleys in the bearish cypher.
The cypher is a five point harmonic chart pattern, made up of points XABCD. The cypher is easy to spot on a chart because it has a characteristic wave like appearance displaying either rising peaks or falling valleys.
You can trade the cypher like other harmonic patterns, by waiting for a reversal at the final point and then using pending orders to profit from any potential breakout.
Bullish, Bearish Cypher Patterns
In any cypher, points X, C and D are the critical points. For a bullish cypher, X should be the pattern low and C the pattern high. A bearish cypher makes its high at X and its low at C.
In the bullish cypher, the points A and C should make successively higher highs and point D must be above X. In the bearish cypher points A and C must make successively lower lows and point D should be below X
The reversal is expected at point D, the final point in the pattern.
To validate a cypher check that
AC retraces 38%-62% of XA
BC retraces 113%-141% of XA
AD retraces 78% of XA
Always allow a tolerance of a few percent around these numbers as they will rarely be exact.
The cypher has a slightly different appearance to the butterfly, bat and gartley. In a cypher, C makes a stronger rebound beyond A and that gives the appearance of rising peaks in the bullish cypher and falling valleys in the bearish cypher.