Advantages & Disadvantages of Harmonic Patterns – Presentation #3

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
Patterns

• 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
  clearly.
• 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
  ratios.

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
  them.
• 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
  timeframes/swings.
• 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.