What are Harmonic Patterns?

Harmonic Price Patterns

 

Harmonic patterns are formations based on geometry and mathematical fractals. The basic concept behind harmonic trading is primary ratio and its derivatives (1.618, 0.618, etc.). Harmonic patterns work as powerful signs of potential trend reversals and can be either bullish or bearish.

 

Which are the Basic Harmonic Patterns?

There are six (6) basic harmonic patterns. These formations are more reliable when trading in M30 and higher timeframes. The general win / lose ratio of harmonic trading strategies is above 70%.

  1. ABCD Pattern
  2. Three-Drive Pattern
  3. Gartley 222 Pattern
  4. Harmonic Bat Pattern
  5. Harmonic Crab Pattern
  6. Harmonic Butterfly Pattern

This is a combination of Harmonic Butterfly Patterns..

 

Key Issues for trading with Harmonic Patterns

These are some key issues when trading with harmonic patterns:

  1. Traders should open their Long or their Short Positions by the time a harmonic pattern is near to completion
  2. It is more reliable to identify harmonic patterns in longer timeframes (above M30)
  3. Harmonic Patterns in higher time frames should not conflict with each other
  4. In general, the Risk/Reward ratio must be above 1:3
  5. Each harmonic pattern shows different behavior according to the market movement

 » Learn Everything about Harmonic Patterns (with charts and examples) at TradingCenter.org

 

 

Key questions when trading with Harmonic Patterns

  1. Does the price action indicate the existence of a potential pattern?
  2. What is this pattern?
  3. Is it a basic ABCD pattern or another harmonic pattern?
  4. Are there any other harmonic patterns in other timeframes that can confirm or can cancel this pattern?
  5. Do time cycles confirm the existence of this pattern? (Time symmetry)
  6. At what point this pattern will come to completion?
  7. At what price the pattern will not be longer valid? (Close to this price you may place your Stop-Loss order)
  8. What is the optimal price for taking my profits (Take-Profit order)
  9. What is the Risk/Reward of that trade? (Risk/Reward must be above 1:2 or even better 1:3)
  10. How much of my capital should I risk in this trade? (Choosing Capital Leverage)

 

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Read More: » What is Stochastic Oscillator | » What is Williams %R | » What is Pivot Point | » What is RSI | » What is MACD  | » What are Round Numbers?

 

■ What are Harmonic Patterns

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