How To Trade Harmonic Patterns – Presentation #5

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How to Trade Harmonic

With regular practice, traders can understand the Harmonic
patterns and spot them conveniently through the Fib tools. As stated in the
previous chapters, the common Harmonic patterns are essentially the 5 point
patterns i.e. Gartley, Crab, Butterfly, Cypher, Crab, Bat and Shark patterns.
These Harmonic patters come embedded with 3 point i.e. ABC and 4 point i.e.
ABCD patterns. Each and every swing in price that take place within these very
points are interconnected as well as come with Harmonic ratios that are based
on Fib pattern.

These patterns either form or resemble a complete W or M
shape or even W and M combinations (in 3 drives case). On the other hand, the 5
point Harmonic patterns feature a crucial origin point ‘X’, which is followed
by impulsive wave i.e. XA. This, in turn, is followed by corrective wave that
forms an ‘EYE’ at point B, thus completing an AB leg. Again, this is followed
by tend wave i.e. BC and is eventually complete by CD or corrective leg.

The crucial harmonic ratios that can seen between the legs indicate whether it is retracement or extension based pattern, thereby defining the very name of the pattern i.e. Butterfly, Crab, Gartley etc.  Traders must remember that all 4 point and 5 point patterns come embedded with ABC i.e. 3 point chart patterns.

Also, all the 5 point patterns follow same principles as
well as structures. These patterns differ only in terms of ratios, which makes
them easily identifiable. Apart from this, they also differ in accordance with
the location of the important nodes such as X, A, B, C, D. This is precisely why
when traders are able to understand even a single pattern, they are able to
understand others too. Traders can consider using automated software for the
recognition of pattern instead of relying on themselves.

In addition to this, traders must also identify trades and
combine them with market analysis i.e. how existing price reacts to specific
levels like support, resistance and pivots and the manner in which indicators
have been performing in relation to historical prices. This will help them in
identifying profitable trading opportunities in the market.

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