In this post we are going to discuss in depth what are Harmonic Price Patterns and how to trade them. Price action is everything in trading. There are a number of chart patterns that have been proven to work over and over again over the last many years. Price is just the sum total of all the buying and selling taking place at a certain point in time. If price is rising, it means that more buying is taking place as compared to selling and the buyer sentiment is dominant in the market. In the same manner if the price is falling, it means more selling is taking place as compared to buying and the seller sentiment is dominant in the market.
What Are Harmonic Price Patterns?
If you want to become a super successful trader than you should master the art of chart reading and identifying certain chart patterns that includes the Harmonic Price Patterns. Harmonic patterns are little bit more advanced as compared to candlestick patterns. Identifying these harmonic patterns requires lot of training. Did you watch this video that reveals a candlestick patterns that changed everything for us? Now combining candlestick patterns with harmonic patterns is a good idea. Watch this 1 hour recorded webinar that provides you a detailed introduction to Harmonic Price Patterns.
Now harmonic price pattern identification requires a lot of experience and training. As you can see above identifying Harmonic Patterns requires a good grasp of the concept of Fibonacci Retracement and Extension. There are a number of harmonic patterns that you should master. These patterns are:
1. ABCD Pattern
2. Three-Drive Pattern
3. Gartley Pattern
4. Crab Pattern
5. Bat Pattern
4. Butterfly Pattern
In the next series of posts we will discuss each one of the above patterns in more detail. It will be like one post per pattern. So the next post will be on ABCD pattern.
How To Trade Harmonic Price Patterns?
Harmonic price patterns take geometric price pattern trading to the next higher level. Most of the technical analysis is reactive in nature. You focus on reacting to what the market is doing instead of trying to predict what the market will do. Unlike other technical tools, these patterns try to predict the future movement of the market. This is something that can help you a lot. These patterns use fibonacci numbers to predict the future market movement which is supposed to be very accurate. Watch the video below that explains how to trade these price patterns!
Now just like any other trading strategy, harmonic trading is not 100% successful. There are problems when you trade these patterns just like any other pattern. Always remember these patterns have a high probability of success but it doesn’t mean that they are always successful.
There Are Problems in Harmonic Trading
As said above there are problems in harmonic trading. Here are 5 major problems when you are going to trade these patterns are:
- Harmonic patterns are highly subjective just like the fibonacci levels. Which swing high and swing low to use. It is always a subjective decision.
- Sometimes you see the harmonic pattern but the market doesn’t want to see it. What this means? Markets do what they want to do and it happens often that they don’t respect these patterns.
- Most of the time waiting for these patterns will result in you missing the big moves in the market.
- Most of the time your stop loss will get hit. Why? When you place stop loss at obvious levels the probability of getting them hit is high.
- These patterns will also confuse you when the market is ranging.
What this means is keep you trading simple. Learn these patterns but do not depend on them fully. Did you read our last post in which we told you that gold rally is coming to an end? Read the post and you will learn how we keep our analysis simple. We don’t use any harmonic patterns in our analysis. Watch another video below!