The Harmonic Cypher pattern is visually an inverse pattern of the more common Butterfly harmonic pattern (read more about butterfly pattern). It is not as commonly occurring as the Butterfly pattern and is distinct by the strict rules that govern the Cypher harmonic pattern. The Cypher pattern was discovered and defined by Darren Ogles bee.
The chart below illustrates a bullish and a bearish Forex Cypher pattern.
Cypher Pattern – Rules
The Cypher pattern starts with a market price that establishes the X and A points. Once this leg is determined, the pattern evolves.
Point B retraces to 0.382 – 0.618 Fibonacci level of the leg XA
Point C is formed when prices extend the XA leg by at least 1.272 or within 1.130 – 1.414 Fibonacci extension level
Point D is formed when it retraces 0.782 Fibonacci level of XC
Point D is also where prices are expected to reverse
Targets are determined as 0.382 and 0.618 Fibonacci retrenchment levels of the CD leg
Stops losses are placed a few pips below or above the high or low of point X
Important points when trading the Cypher Pattern
The cypher forex pattern is not as common as other harmonic patterns such as Gartley’s or butterfly patterns
Although the occurrence of the cypher pattern is rare, it is by no means a pattern that offers a higher probability
Due to the rare occurrence of the cypher pattern, traders should make room for adjustments to the Fib levels
Waiting for the perfect cypher pattern will result in the trader watching the charts for a very long time with no valid set up occurring
The cypher pattern can occur on any time frame, but is best to use on H1 and higher
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