Advantages & Disadvantages of Harmonic Patterns – Presentation #3

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The Harmonics patterns use geometric pricing patterns a level higher with the help of the Fibonacci ratios, which eventually helps traders in defining exact turning points. Thus, traders use the Harmonics pattern to determine the movement of price in future. Below, learn more about the advantages and disadvantages of Harmonics pattern.

Benefits of Harmonic

  • They help traders in predicting the stops as
    well as the movement of price in future in advance.
  • They are repetitive and frequent in nature.
  • They work really well with market symmetry and
    context and help traders to take well calculated moves.
  • Work with all types of instruments available in
    the market in addition to different timeframes.
  • Allow traders to use other theories such as the
    RSI, CCI, MACD, DeMark and other indicators.
  • They provide attractive risk: reward ratio.
  • They are independent of news and feature
    appropriate price patterns and structures.
  • They define invalidation level for every pattern
  • Fits the law of trading i.e. buying when prices
    are low and selling when it is high.
  • Enables the traders to forecast trend reversals.
  • Highly advanced technical method of trading that
    can be automated with the help free indicators.
  • Allows traders to combine pricing patters with
    the Fibonacci numbers/ratios.
  • 15. Combines price patterns with Fibonacci

The Disadvantages

Following are the
disadvantages of harmonic patterns:

  • They are highly complex and technical in nature,
    which makes it really difficult for traders to understand as well as perfect
  • It is difficult to correctly identify and
    automate or code the harmonic patterns.
  • The conflict in the Fibonacci projections and
    retracements make the task of identifying reversal and projection difficult.
  • The patterns become highly complex when the
    opposing chart patterns are formed as a result of the same swings or other
  • The risk to reward ratio from lower ranked and
    un-symmetric patterns are very low.
  • These patterns are commonly seen in the range
    markets because of the manner in which they are constructed. This causes the
    traders to lose opportunities in the markets that are trending.

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