Harmonic price patterns
Most popular price action patterns, including Double top/bottom, Head and shoulders, Triangle are related to harmonic patterns. A harmonic pattern is a structure that contains at least one of the following three main elements: 1) Pattern 2) Trend line 3) Retracement or time element which also deals with Fibonacci sequence. It is rather unusual but can be very powerful if you trading as a harmonic trader as well as Forex harmonic patterns software developer.
What are Fibonacci price levels? And how it should be used in forex trading?
Generally speaking, the Fibonacci retracement level is an area of prior support or resistance. Therefore, when prices reach the Fibonacci level, there is a strong probability that they will reverse. This is because as prices move farther away from their origin (0%) after the correction begins, the likelihood of them continuing to decline decreases, and thus at certain Fibonacci levels they can be expected to turn around.
Fibonacci retracement levels are used by Fibonacci traders as a means to measure the "strength" of an existing trend and often indicate areas where prices might be expected to reverse.
What is the Gartley price pattern? Why it's also called butterfly pattern, crab pattern, or four-step pattern? And how you can use it in your forex trading?
The gartley pattern is a popular and reliable price action strategy. The bullish Gartley pattern consists of five waves: 1-2-3-4-5. Those 3 first waves, which move against the main trend (a trend that we follow), are called as 'corrective phase'. After those three corrective phases, the fourth wave of the Gartley pattern is the impulsive 5th wave, which brings us back to our main trend.
This price action strategy is very popular among traders and it's considered to be one of the most powerful harmonic patterns for swing trading. There are 2 types of Gartley patterns used in forex: Bullish and bearish.
How you can trade Forex harmonic patterns?
It depends on which harmonic price pattern or strategy you are using, but most of the time after the pattern is complete it might be a good idea to take profit in the opposite direction of the main trend. For example, if we use the Gartley pattern and after entering the market on the 4th wave we take profit when the 3rd wave comes back to '0%', in this example: 0.382, and hold the position until the 5th wave ends and price moves in our favorable direction.
