Harmonic ABCD pattern is a classic reversal pattern.
This pattern is composed of 3 main elements (based on wicks of the candles): 1️⃣ AB leg 2️⃣ BC leg 3️⃣ CD leg
The pattern is considered to be bullish if AB leg is bearish. The pattern is considered to be bearish if AB leg is bullish.
AB leg must be a strong movement without corrections within. A is its initial point and B is its completion point.
BC leg is a correctional movement from B point after a completion of AB leg. The price may fluctuate within that. B is its initial point and C is its completion point.
CD leg must be a strong movement without corrections within. C is its initial point and D is its completion point.
❗️ABCD movement is harmonic if the length and the time horizon of AB and CD legs are equal. By the length, I mean a price change from A to B point and from C to D point. By the time, I mean a time ranges of AB leg and CD leg.
If the time and length of AB and CD legs are equal, the pattern is considered to be harmonic, and a reversal will be expected from D point at least to B point.
🛑If the pattern is bullish, stop loss must be placed below D point. 🛑If the pattern is bearish, stop loss is placed above D point. Initial target level is B point.
Usually, after reaching a B point the market returns to a global trend.
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