Harmonious Patterns in the Currency Markets
Harmonious price patterns identify the phases of a pullback so that once the pattern completes, you have a clear signal to buy or sell. Retracements are boring at any time, and any help is always welcome, although, with harmonic trajectory patterns, the orthodoxy is to apply for Fibonacci numbers. Again, Fibonacci numbers are not a proven theory and in fact, there is a lot of evidence that Fibonacci numbers only appear as often as chance allows in stock prices, forex included. However, when a perfect or near-perfect Fibonacci number appears, many traders will see it and get the expected result, so Fibonacci-based trading ideas are not worth dismissing.
How can these harmonious patterns help you improve your trading strategy?
Depending on the reason (each reason can tell a different story), they can be a clue to:
Reversal Pattern - Predicts that the price will reverse and move in the opposite direction.
Reason for continuation: predicts that the price will continue to move in the same direction
In addition, this pattern can be a bullish pattern (i.e. backtracking to an upward price movement) or a bearish pattern (i.e. reversing backward price movement. down).
If you want to know more about these models, you can read the articles on each model below. If you prefer to enroll in a video course (I know some people prefer videos, maybe you do), you can check out the two Udemy courses that I shortlisted for you: Trading Forex Harmonic Patterns - With Multiple Examples of Charts and Harmonics Trading - The low-risk type of trading. You want to get into the details of a particular harmonic pattern. You are in the right place. These patterns often have very quirky names. Feel free to check out the detailed article on each individual harmonic pattern just below.
Harmonious Patterns in Forex
The harmonic patterns identified correspond to the critical Fibonacci levels. As you may already know, Fibonacci numbers can be seen around us in nature, and these harmonious proportions are also present in financial markets. Fluent trading in the forex market involves identifying and analyzing a handful of graphical numbers. In most cases, these patterns consist of four price movements, all of which correspond to specific Fibonacci levels. Therefore, a harmonious chart pattern should always be analyzed with the Fibonacci Retracement and Extensions tools. For the more inclined, there are also various harmonic indicators and software that automatically detect different harmonic trading patterns. The most commonly traded harmonic patterns include the Gartley pattern, the bat pattern, the butterfly pattern, the cipher pattern, and the crab pattern.
Top 2 Harmonic Models
The BAT Model
The Alternative Harmonic Bat Model is one of the more accurate trading models that perform exceptionally well in the BAMM Relative Strength Index (RSI) setup. It also helps accurately enough to understand the market trend in detailed explanation in the given image.
The crab is considered one of the most accurate models by Carney and offers inversions very close to what the Fibonacci numbers indicate. This model is similar to the butterfly but differs in the way it is measured. In a bullish setup, point B will retreat 0.382-0.618 from XA. BC will track 0.382 to 0.886 from AB. CD goes from 2,618 to 3,618 of AB. Point D is a 1618 extension of XA. Take long positions near D with a stop loss not far below. For the bearish setup, enter a short position near D with a stop loss not far above it.