What are the 6 Harmonic Price Patterns in Trading?
After you get some basic charts down, you can move on to something like harmonic price patterns in the financial markets.
The idea behind these patterns is that they are going to be retracements of recent trends. In other words, they are often a reversion back to a recent trend that just took place in the market. Think of it as the market going for one more loop around the block for a trend that it has just established recently.
Harmonic Price Patterns and the Continuing Trend
When you use the tools necessary to spot a harmonic price pattern, you may be able to decide to jump in on the trend that is playing out yet again.
Some of the harmonic price patterns to be on the lookout for include:
- Bat pattern
- Crab pattern
- Butterfly pattern
- Three-Drive pattern
- Gartley pattern
- ABCD pattern
All of these and many others like them are critical towards developing something that you can spot in the market and take advantage of. Say what you will, but there is a lot to be gained by looking at patterns that are recognizable and that you know what to do with.
Always remember for harmonic price patterns the key is to be patient and wait until the whole pattern is completed before determining any long or short trades. When someone is looking for a way that they can take advantage of price movements in the market, their best option may be to spot some of these patterns and make the most of them.
Over the next few articles, we’ll show you what they are and how to spot them!
The ABCD and the Three-Drive Harmonic Price Patterns in Trading
In this article, discover the structure of the ABCD and the three-drive harmonic price patterns in trading.
The most basic thing that we learn in school, the ABCs, may prove to be useful when used in financial markets as well. In this case, we are talking about the ABCD patterns that people can look for in various chart patterns.
The ABCD and the Three-Drive Harmonic Price Patterns
The ABCD Harmonic Pattern
When we are looking at an ABCD pattern, the AB and CD lines are known as the legs of the pattern, whereas the BC line is known as a correction (or retracement).
You might also think of this as a zig-zag pattern in which the currency pair is trading up or down, and then it has moments of correcting in the opposite direction of the prevailing trends.
Noticing patterns like this may help you decide when to get in or out of your trade, but you need to be absolutely certain that what you are looking at really is an ABCD pattern, and the only way to truly know that is to look for the tell-tell signs such as:
The AB line needs to be equal in length to the CD line
The amount of time for the AB line to form should be the same as the amount of time for the CD line to form.
The Three-Drive Harmonic Pattern
The three-drive pattern is the same as the ABCD line except that it has three legs instead of just two. To find a pattern like this, you will probably want to use a Fibonacci tool to determine if the legs are the same length as one another as they are supposed to be.
You should be able to see this pretty well even with the naked eye, but the Fibonacci tool can help you confirm what you think you are seeing is actually there.
Once the entire three-drive pattern has run its course, then you may be ready to pull the trigger and place your trade to buy or sell the pair. You are assuming that the ongoing trend is going to continue at this point, and you should put in your trade so that you are ready to take advantage of the continued trend of the market moving forward.
The problem with learning advanced techniques like Patterns is that you need a Mentor – to show you all possible variations, traps and real time trading tips.
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