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Forex Course

126. Trading Harmonic Patterns – Detailed Summary

Introduction 

Introduction 

Introduction 

We have discussed all the major Harmonic trading patterns in our previous course lessons. The purpose of this article is to provide a comprehensive summary so that it will easy to navigate for you. Although you have a fair idea on how to trade these patterns, it is essential to practice them over and again to master them. From our personal experience, we can say that Harmonic patterns are THE most difficult patters to trade, and there are many reasons for it.

One of the critical reasons why it is so difficult to trade these patterns is because of its lack of appearance on the price charts. That is, we hardly be able to see these Harmonic patterns forming in any of the currency pairs. Having said that, once we identify and trade them correctly, we can easily make a massive sum of profits when compared to trading other Forex patterns. Hence, as a technical Forex market analyst, you must be able to identify and trade these patterns with the utmost accuracy.

In our previous course lessons, we have mentioned detailed ways to identify these patterns on the price charts using Fibonacci levels. Each of the pattern legs needs to respect specific Fibonacci extensions and retracement levels in order to confirm their formation. So make sure to take the help of these Fib ratios for easy identification. As always, keep practicing the trading of these patterns in a demo account until you master them.

Below are the links for the course lessons related to the Harmonic Patterns.

Introduction To Harmonic Pattern – Link

Trading The AB=CD Pattern – Link | Extended Trading Strategy – Link

Trading The Crab Pattern – Link | Extended Trading Strategy – Link

Trading The Butterfly Pattern – Link | Extended Trading Strategy – Link

Trading The Bat Pattern – Link | Extended Trading Strategy – Link

Trading The Gartley Pattern – Link | Extended Trading Strategy – Link

The only thing that is crucial while trading or identifying these patterns is to be patient. As you all are aware by now, it takes a lot of time for a Harmonic pattern to form. There will be many cases where three legs of the pattern will be formed accurately, but the final leg rules won’t be met, and as a result, the entire pattern gets invalidated. Don’t be disappointed or impatient at that point. After all, trading is a game of skill and patience; the more patient you are, the better results you will see. All the best!

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Forex Harmonic

The Deep Crab Pattern

Harmonic Pattern Example: Bearish Deep Crab
The Deep Crab Pattern    
The Deep Crab is a variant of the regular Crab pattern. It is still a 5-point extension, and it still

Harmonic Pattern Example: Bearish Deep Crab
The Deep Crab Pattern    
The Deep Crab is a variant of the regular Crab pattern. It is still a 5-point extension, and it still

Harmonic Pattern Example: Bearish Deep Crab

The Deep Crab Pattern    

The Deep Crab is a variant of the regular Crab pattern. It is still a 5-point extension, and it still has the endpoint (D) at the 161.8% extension of XA, but the AB=CD importance is a little different.

The most distinguishing component of this pattern is the importance of the specific 88.6% retracement point of B. Along with the Crab Pattern, the Deep Crab Pattern presents an especially extended and long move towards D.

Carney stressed that the Crab and Deep Crab represent significant overbought and oversold conditions, and reaction after completion is often sharp and quick. It is the opinion of many traders and analysts that the Crab Pattern and Deep Crab represent some of the fastest and profitable patterns out of all harmonic patterns.

Deep Crab differences from the Crab

  1. BC leg projection is not as extreme as the Crab.
  2. B must be at least an 88.6% retracement. Common to move more than 88.6% retracement level not above/below X (not above X in a Bearish Deep Crab and not below X in a Bullish Deep Crab).
  3. AB=CD pattern variations are more important in the Deep Crab Pattern.
  4. The BC leg is a minimum of 224% but can extend to 361.8%.

Sources: Carney, S. M. (2010). Harmonic trading. Upper Saddle River, NJ: Financial Times/Prentice Hall.  Gilmore, B. T. (2000). Geometry of markets. Greenville, SC: Traders Press.  Pesavento, L., & Jouflas, L. (2008). Trade what you see: how to profit from pattern recognition. Hoboken: Wiley.

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Forex Harmonic

The Crab Pattern

The Crab Pattern
 

The crab pattern is another of Carney’s harmonic patterns and one of the first that he discovered. The essential condition of this pattern is the

The Crab Pattern
 

The crab pattern is another of Carney’s harmonic patterns and one of the first that he discovered. The essential condition of this pattern is the

The Crab Pattern

 

The crab pattern is another of Carney’s harmonic patterns and one of the first that he discovered. The essential condition of this pattern is the extremely tight and resistance endpoint of 161.8% of the XA leg.

Like almost all harmonic patterns, the potential reversal in price action after this pattern has been complete is generally fast, violent and powerful. However, Carney gives special attention to this pattern and reports that it is usually the most extreme of all harmonic patterns.

The pattern is not as frequent as others due to its five-point extension structure. It is desirable to utilize an oscillator to filter entries of this pattern according to any divergence between price and your selected oscillator.

Crab Pattern Elements

  1. B must be a 61.8% retracements or less of XA.
  2. The BC projection can be quite extensive, generally 261.8%, 314%, or 3618%.
  3. An AB=CD 161.8% or an Alternate AB=CD 127% is required for the formation of this pattern.
  4. The extension of 161.8% of XA is the end limit of the pattern.
  5. C has an expansive range between 38.2% and 88.6%.

Sources: Carney, S. M. (2010). Harmonic trading. Upper Saddle River, NJ: Financial Times/Prentice Hall.  Gilmore, B. T. (2000). Geometry of markets. Greenville, SC: Traders Press.  Pesavento, L., & Jouflas, L. (2008). Trade what you see: how to profit from pattern recognition. Hoboken: Wiley.