The ABCD pattern -MITHUNKNIT
We’ll start our study of the harmonic price patterns with the ABCD patterns. These patterns are as interesting as they sound and quite simple to grasp, if you have your Fibonacci concepts clear. ABCD patterns consist of 3 legs; AB, BC and CD, and can have some variations as explained follows:
The Classic ABCD pattern basically comprises three legs, a movement
from A to B, a corrective move from B to C and a third leg from C to D.
The corrective move BC would generally retrace from B to the Fibonacci 61.8% retracement level at C. Next, the third leg CD would generally extend to the Fibonacci 127.2% extension level from BC to D. As mentioned in the above diagram the move from B to C can also be 78.6% retracement of AB and in such case CD could be 161.8% extension of the move from B to C.
The AB = CD pattern is a variation of the classical ABCD pattern and as the name suggests it has following characteristic:
Please note that some sites would mention that the length AB needs to be equal to length CD. Please don't worry in case you are wondering about measuring those lengths on your trading charts. No one trades with a measuring tape in hand and what basically is to be seen is that the height from A to B (or the number of pips from A to B) need to be equal to height from C to D i.e. number of pips from C to D.
Regardless of the type of the ABCD pattern, point D would be the point to enter trades depending if the pattern is bearish or bullish, as shown in the above diagram. The stop-loss can be slightly below the level of support or resistance.
In the bearish pattern on the left, you would sell at point D. You would buy at point D in the bullish pattern on the right.
We’ll start our study of the harmonic price patterns with the ABCD patterns. These patterns are as interesting as they sound and quite simple to grasp, if you have your Fibonacci concepts clear. ABCD patterns consist of 3 legs; AB, BC and CD, and can have some variations as explained follows:
The corrective move BC would generally retrace from B to the Fibonacci 61.8% retracement level at C. Next, the third leg CD would generally extend to the Fibonacci 127.2% extension level from BC to D. As mentioned in the above diagram the move from B to C can also be 78.6% retracement of AB and in such case CD could be 161.8% extension of the move from B to C.
The AB = CD pattern is a variation of the classical ABCD pattern and as the name suggests it has following characteristic:
- Move from C to D = Move from A to B.
- Time taken from the move from C to D = Time taken from A to B.
Please note that some sites would mention that the length AB needs to be equal to length CD. Please don't worry in case you are wondering about measuring those lengths on your trading charts. No one trades with a measuring tape in hand and what basically is to be seen is that the height from A to B (or the number of pips from A to B) need to be equal to height from C to D i.e. number of pips from C to D.
Trading with ABCD Pattern
Regardless of the type of the ABCD pattern, point D would be the point to enter trades depending if the pattern is bearish or bullish, as shown in the above diagram. The stop-loss can be slightly below the level of support or resistance.
In the bearish pattern on the left, you would sell at point D. You would buy at point D in the bullish pattern on the right.
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