Trading the Harmonic Patterns Effectively
Chart Pattern Analysis is an important skill to acquire especially if you want to be a serious and profitable trader. While it may seem that other sexier Technical Tools may be more effective, Chart Pattern Analysis remains leaps and bounds ahead because it allows any serious trader to be predictive and to anticipate rather than react to market movement. Basically there are just 2 main types of patterns. We can just safely classify them as Continuation pattern or Reversal Pattern.
Why Are Chart Pattern Analysis Reliable?
In the history of market prices, it’s all about supply vs demand and at times, the market may act with an extreme sentiment and that’s usually down to extreme Fear or greed. Market movements have historically moved only in 3 patterns. Basically the market moves
In those movement, we might see a trend, consolidation and perhaps a re-trend or then reversal. This kind of movement is universal in ALL financial instruments. In the sideway movements, Forex pairs will experience a tighter range. And it is this ranging behavior we are able to observe repeating chart patterns.
Trading the Harmonic Patterns Effectively
There have been a lot written on the Harmonic Patterns and the last thing I want to do is to go rambling on the same thing that you can read elsewhere. So let’s not waste anytime here…
In the modern Harmonic Patterns, there is the same 5 point movement that makes the market more predictive. This was the original pattern created by H.M. Gartley. In later years, Larry Pesavento greatly improved the Gartley Patterns by incorporating the ever green Fibonacci ratios to the original Gartley Patterns. And then Scott Carney came along and adding more variation to the already reliable Gartley Patterns and it was when Crab, Bat, Shark, and 5-0, brought the entire Harmonic Pattern to life.
So what started as the Gartley Pattern evolved to what we have today as the Harmonic Pattern with the addition of Crab, Bat, Shark and 5-0. The main concept of Harmonic Patterns is the relationship of time and price movements, which shares the same concept as the Fibonacci Ratio. In case you do not know, the Fibonacci Ratio is a powerful theory that identifies key support and resistance points in the market. While many Fibonacci Experts like to believe that the Ratios work well in any market and any time frame, we personally feel that it works best in higher timeframes.
Examples of Gartley Pattern
To draw a Gartley Pattern, we will need Five Points. While it may look complicated at first, it’s really not…when you connect the 5 price points. These 5 price points are usually the pivot points or turning points in the market.
The Gartley Pattern should resemble either a “M” or “W”. Usually the M will be the Bullish pattern and the W will be the bearish chart pattern. The Bearish Gartley Pattern usually looks like a W with X as the starting point moving to the pivot turning point of A and a rebound to B. The Bears will push it down to a higher C before the Bulls making one last bullish attempt to D (which has to be lower than X). At D, this is when you and I decide if we want to pull the trigger.
X is the starting point moving to the high of A. Then the retracement to B and another upward attempt to C before another retracement to D. D is where the trigger will be. An ideal Gartley Pattern should have 5 key pivot points that should include 2 retracement and 2 rebound swings that “coincidentally” coincides with Fibonacci Ratios. The center of the Gartley Pattern is B and the trigger point to buy or sell is D.
Harmonic Pattern Recognition Software
Harmonic Patterns are reliable chart pattern analysis that haven been around for almost 100 years now. This is a time tested trading approach that exploits repeating price patterns. It greatly serves traders who can recognize this chart pattern. However, these charts patterns are not visible to the newer traders. Usually traders with experienced are able to find these Harmonic Patterns consistently.
If you are serious about learning and trading Harmonic Patterns better, then you want to get our FREE PDF Report on how to trade Harmonic Patterns in 3 simple steps.
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