• Harmonic Patterns
• Pattern Identification
• 5-point Patterns

## Harmonic Patterns • Harmonic patterns foundation was laid by H.M. Gartley in 1932 and later by Scott Carney in his books of “Harmonic Trading”
• Harmonic patterns reflect geometric price structures which adhere to Fibonacci ratio relationships
• These harmonic structures exhibits unique price movements and key turning or trend reversal points
• This factor is very helpful in trading as it provides highly trustful price entries and key levels for targets or stops
• Harmonic trading attempts to predict future movements, and this is what differentiates it from other indicators or oscillators

## Pattern Identification • Harmonic patterns are complex, but once a trader understands the pattern structure they can be spotted easily
• These patterns are either forming or completed “M” or “W” shaped structures or combinations of “M” and “W”
• All primary harmonic patterns are 5-point patterns with points (X, A, B, C, D)
• Price swings between these points are interrelated and have harmonic ratios based on Fibonacci
• Fibonacci ratios help traders in defining precise turning points in these patterns

## 5-point Pattern Example • All 5-point harmonic patterns have similar principles and structures, and they differ only by their ratios
• Harmonic patterns (5-point) have a critical origin (X) followed by an impulse wave (XA)
• Followed by a corrective wave to form the “EYE” of the pattern at (B) completing (AB) leg
• Then followed by a trend wave (BC)
• Finally completed by a corrective leg (CD) that ends around the Potential Reversal Zone • A possible pattern formation is identified after the first 3 legs (XA, AB, BC) are completed
• A potential trade setup is recognized as the last leg (CD) starts to develop
• Fibonacci extensions, retracements and projections are used to determine the Potential Reversal Zone
• All harmonic patterns have a clearly predefined Potential Reversal Zones (PRZ)
• The initiation of new trades should take place in this zone and only after price reversal action

## 5-Point Harmonic Patterns

Patterns looks similar and only differ based on the location of their key nodes

Among the most common 5-point harmonic patterns are:

• Gartley
• Bat
• Butterfly
• Crab
• Cypher
• Shark

## Bullish Gartley Pattern • B = 61.8% retracement of XA
• C = 38.2% to 88.6% retracement of AB
• D = 113% to 161.8% projection of BC
• D = 78.6% retracement of XA
• Long positions after clear bullish reversal
• Stop loss below the PRZ
• Target 1 = 38.2% retracement of AD
• Target 2 = 61.8% retracement of AD

## Bearish Gartley Pattern • B = 61.8% retracement of XA
• C = 38.2% to 88.6% retracement of AB
• D = 113% to 161.8% projection of BC
• D = 78.6% retracement of XA
• Short positions after clear bearish reversal
• Stop loss above the PRZ
• Target 1 = 38.2% retracement of AD
• Target 2 = 61.8% retracement of AD

## Bullish Bat Pattern • B = 38.2% or 50% retracement of XA
• C = 38.2% to 88.6% retracement of AB
• D = 161.8% to 261.8% projection of BC
• D = 88.6% retracement of XA
• Long positions after clear bullish reversal
• Stop loss below the PRZ
• Target 1 = 38.2% retracement of AD
• Target 2 = 61.8% retracement of AD

## Bearish Bat Pattern • B = 38.2% or 50% retracement of XA
• C = 38.2% to 88.6% retracement of AB
• D = 161.8% to 261.8% projection of BC
• D = 88.6% retracement of XA
• Short positions after clear bearish reversal
• Stop loss above the PRZ
• Target 1 = 38.2% retracement of AD
• Target 2 = 61.8% retracement of AD

## Bullish Butterfly Pattern • B = 78.6% retracement of XA
• C = 38.2% to 88.6% retracement of AB
• D = 161.8% to 261.8% projection of BC
• D = 127% to 161.8% projection of XA
• Long positions after clear bullish reversal
• Stop loss below the PRZ
• Target 1 = 61.8% retracement of CD
• Target 2 = 127% projection of CD

## Bearish Butterfly Pattern • B = 78.6% retracement of XA
• C = 38.2% to 88.6% retracement of AB
• D = 161.8% to 261.8% projection of BC
• D = 127% to 161.8% projection of XA
• Short positions after clear bearish reversal
• Stop loss above the PRZ
• Target 1 = 61.8% retracement of CD
• Target 2 = 127% projection of CD

## Bullish Crab Pattern • B = 38.2% to 61.8% retracement of XA
• C = 38.2% to 88.6% retracement of AB
• D = 261.8% to 361.8% projection of BC
• D = 161.8% projection of XA
• Long positions after clear bullish reversal
• Stop loss below the PRZ
• Target 1 = 61.8% retracement of CD
• Target 2 = 127% projection of CD

## Bearish Crab Pattern • B = 38.2% to 61.8% retracement of XA
• C = 38.2% to 88.6% retracement of AB
• D = 261.8% to 361.8% projection of BC
• D = 161.8% projection of XA
• Short positions after clear bearish reversal
• Stop loss above the PRZ
• Target 1 = 61.8% retracement of CD
• Target 2 = 127% projection of CD

## Bullish Cypher Pattern • B = 38.2% to 61.8% retracement of XA
• C = 127% to 141% projection of XA
• D = 127% to 200% projection of BC
• D = 78.6% retracement of XC
• Long positions after clear bullish reversal
• Stop loss below the PRZ
• Target 1 = 38.2% retracement of CD
• Target 2 = 61.8% retracement of CD

## Bearish Cypher Pattern • B = 38.2% to 61.8% retracement of XA
• C = 127% to 141% projection of XA
• D = 127% to 200% projection of BC
• D = 78.6% retracement of XC
• Short positions after clear bearish reversal
• Stop loss above the PRZ
• Target 1 = 38.2% retracement of CD
• Target 2 = 61.8% retracement of CD

## Bullish Shark Pattern • B = 38.2% to 61.8% retracement of XA
• C = 113% to 161.8% projection of AB
• D = 161.8% to 224% projection of BC
• D = 88.6% to 113% retracement / projection of XC
• Long positions after clear bullish reversal
• Stop loss below the PRZ
• Target 1 = 38.2% retracement of CD
• Target 2 = 61.8% retracement of CD

## Bearish Shark Pattern • B = 38.2% to 61.8% retracement of XA
• C = 113% to 161.8% projection of AB
• D = 161.8% to 224% projection of BC
• D = 88.6% to 113% retracement / projection of XC
• Short positions after clear bearish reversal
• Stop loss above the PRZ
• Target 1 = 38.2% retracement of CD
• Target 2 = 61.8% retracement of CD • Harmonic patterns provide future price projections and stop levels in advance and are considered leading indicators
• Harmonic patterns are frequent, repeatable, reliable and do produce high probable setups
• Their trading rules are relatively standardized using Fibonacci ratios
• Works on all timeframes and on all market instruments
• Other momentum indicator theories (CCI, RSI, MACD, DeMark…) can be used along with them • Harmonic patterns are complex and highly technical to understand and master them
• Correct identification and automation (coding) of harmonic patterns is difficult
• Conflicting Fibonacci retracements and projections make it difficult to identify the reversal or projection zones
• Complexity arises when we get opposing patterns from different timeframes
• The risk/reward factors from some of the patterns are pretty low

## The Story of Desmond Leong

Desmond is your average trader. He started off blowing up 7 (or more.. lost count) accounts amounting to more than 500k, tested over 30 Expert Advisors (EAs) to no success and spent over 10k on stupid useless courses.

Today he runs an award winning trading team and provides market analysis and webinars to some of the largest brokers such as IC Markets, XM, Axi, Tickmill, FXCM, VantageFX, easyMarkets and more.

He now has a simple goal: Creating an army of traders who trade profitably together and keep each other accountable. Guiding them with the most comprehensive no-BS free tutorials so that no one ever needs to go through the pain he went through himself to become a profitable trader.

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