In the world of foreign exchange trading, harmonic patterns are a popular tool used by traders to identify potential trend reversals and entry and exit points. These patterns are based on the idea that price movements in the market follow mathematical patterns and ratios.
There are several harmonic patterns in forex trading, each with its own unique characteristics and rules. In 2018, there were several commonly used harmonic patterns that traders relied on to make informed trading decisions.
1. The Butterfly Pattern
The butterfly pattern is a reversal pattern that is formed by four price swings. The pattern consists of an initial price move in one direction, followed by a retracement to a specific Fibonacci level. This is followed by another price move in the same direction as the initial move, followed by a second retracement to a Fibonacci level. The pattern is completed by a final price move in the opposite direction of the initial move.
2. The Gartley Pattern
The Gartley pattern is another popular harmonic pattern that is used by forex traders. It is a reversal pattern that is formed by a series of price swings. The pattern consists of an initial price move in one direction, followed by a retracement to a specific Fibonacci level. This is followed by a second price move in the opposite direction of the initial move, which retraces a specific percentage of the initial move. The pattern is completed by a final price move in the direction of the initial move.
3. The Bat Pattern
The bat pattern is a reversal pattern that is formed by a series of price swings. The pattern consists of an initial price move in one direction, followed by a retracement to a specific Fibonacci level. This is followed by a second price move in the opposite direction of the initial move, which retraces a specific percentage of the initial move. The pattern is completed by a final price move in the same direction as the initial move.
4. The Crab Pattern
The crab pattern is a reversal pattern that is formed by a series of price swings. The pattern consists of an initial price move in one direction, followed by a retracement to a specific Fibonacci level. This is followed by a second price move in the opposite direction of the initial move, which retraces a specific percentage of the initial move. The pattern is completed by a final price move in the same direction as the initial move, which retraces a specific percentage of the second move.
5. The Shark Pattern
The shark pattern is a reversal pattern that is formed by a series of price swings. The pattern consists of an initial price move in one direction, followed by a retracement to a specific Fibonacci level. This is followed by a second price move in the opposite direction of the initial move, which retraces a specific percentage of the initial move. The pattern is completed by a final price move in the same direction as the initial move, which extends beyond the initial move.
In conclusion, harmonic patterns are an important tool for forex traders in identifying potential trend reversals and entry and exit points. In 2018, there were several commonly used harmonic patterns, including the butterfly pattern, the Gartley pattern, the bat pattern, the crab pattern, and the shark pattern. Each pattern has its own unique characteristics and rules, and traders must use a combination of technical analysis and market knowledge to make informed trading decisions.
