first one to 618fib with r:r 12
and the second to 1 fib with r:r 22
-2 or 3% MM
-move sl to breakeven when 1:1 or 1:2
The is closely related to the 222 pattern with the main difference being that the pattern’s CD extends beyond the XA leg. The is also identified by the classic ‘M’ and ‘W’ patterns. (see more about other forex patterns)
The was one of the many developed by H.M which were then fine tunes with the introduction of the Fib rations by Scott Carney and Larry Pesavento. Visually, the looks similar to the 222 pattern, especially the Fib ratios between the .
AB can retrace up to 78.6% of the XA leg
BC can retrace between 38.2% – 88.6% of AB
CD can be an extension of 1.618% – 2.618% of AB
CD can also be an extension of up to 1.272% – 1.618% of XA leg
The point D is known as the PRZ or Potential Reversal Zone
From Point D, a trade can be entered with stops at or above (below) the price point at D.
Once a position is entered at D, profits can be booked at 61.8% of CD with the second target at 127.2%. Despite the above rules, in real time such text book patterns that qualify every point of the swing legs do not form as expected, so traders should be a bit flexible while identifying the patterns.