The buy and sell signals are generated after the final C to D leg, when a reversal is expected to occur. The entry of a trade, whether buy or sell, triggers when the pattern is in place.Īfter the AB=CD harmonic pattern has been identified, you can start looking for a trading opportunity at point D. Trading the ABCD pattern involves rules meant to guide people on how to enter trade, lock potential profits and exit with minimum loss if the market follows the opposite direction. How to trade the AB=CD (ABCD) harmonic trading pattern? General principle The idea is to enter the market early enough with a trading position just after the reversal of the CD move. When there’s a confirmation of AB=CD pattern, traders look to set entry points on the chart at the beginning of the emerging reversal after the CD move. At the same time, BC and CD will respond to particular Fibonacci levels. When the CD portion gets to an equivalent distance to AB, it is expected that there will be a reversal of the CD price move. It continues until it gets to a distance equivalent to AB or D. Usually, the price action behavior of the ABCD pattern begins with the price going in a new direction A, which later creates a swing level B, then retraces a portion at C, and finally resumes to take out the important swing at the second position. What does the AB=CD (ABCD) trading pattern tell traders? There are various indicators to assist you in confirming the patter requirements. When trading the ABCD pattern, always conform to the Fibonacci levels. CD is the 127.2 percent Fibonacci extension of BC.BC is the 61.8 percent Fibonacci retracement of AB.Usually, there are two Fibonacci rules associated with the ABCD figure: This pattern needs to conform to particular Fibonacci ratios. How does Fibonacci Ratios integrate with the pattern? It is expected that there will be a reversal and an increase in price after the price completes the CD move. The BC move then reverses into a new bearish move (CD), which goes below the bottom made at point B. This pattern begins with a decrease in price (AB), followed by a reversal and a rise (BC). There are two types of AB=CD trading patterns – the bullish AB=CD and the bearish AB=CD. There are two types of AB=CD (ABCD) patterns In addition to that, the AB=CD formation is much easier to detect on the price chart.Īfter weeks of research, back testing and live trading, experts feel comfortable to recommend this setup to traders. The AB=CD pattern is considered the simplest harmonic pattern because it has significantly less requirements than most of the other harmonic setups.
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