Harmonic patterns

Harmonic patterns

This is one of the harder topics, but if you are persistent enough to learn this type of analysis, the result would pay for the effort. The aim of this method is to recognize specific markets structures called “harmonic patterns” and generate trade ideas with their help.  

Harmonic patterns were discovered by H.M. Gartley in 1932. Later the theory was developed by Larry Pesavento, who wrote a book Fibonacci Ratios with Pattern Recognition.

Harmonic patterns are similar to chart patterns like “Head and shoulders” in a sense that they are based on a specific shape of price action. However, harmonic patterns have something special about them: they are based on the use of Fibonacci tools (retracements and expansions). Such a combination allows these patterns to produce accurate and reliable trade signals. The main idea is to identify the levels at which the general trend will resume after a correction as well as this trend’s targets.

There are many different harmonic patterns: ABCD, Butterfly, Gartley, Shark, Crab, Bat, etc. These patterns can be either bullish or bearish. Many patterns may look rather similar to each other but have some distinctions. The art of harmonic trading is the ability to differentiate between these patterns. Technical analysis assumes that history repeats itself. As a result, the idea is that these patterns will occur in the future and will have the same effect as they did in the past.

The schemes of various harmonic patterns

We will explain how to trade each pattern in the further articles.

The schemes of various harmonic patterns

The main advantage of harmonic patterns is that you won’t need to make guesses because you can rely on specific Fibonacci numbers.

The numbers used in harmonic patterns are either directly or indirectly derived from the 0.618 and 1.618 ratios of the Fibonacci sequence. These derived numbers include 0.786, 0.886, 1.13, and 1.27. There are also many complimentary numbers: 0.382, 0.50, 0.707, 1.41, 2.0, 2.24, 2.618, 3.14, and 3.618. These numbers validate harmonic patterns and determine areas of potential changes in the price.

How to trade using harmonic patterns?

To achieve positive results using harmonic patterns, you will need to:

  1. Remember what different harmonic patterns look like.
  2. Recognize these patterns on the price chart.
  3. Use Fibonacci tools correctly.
  4. Know how to find the targets of harmonic patterns.

The closer is a harmonic pattern seen on the chart to the proportions described for this pattern in textbooks, the higher the probability that it will produce a good trade signal. Notice that it’s necessary to wait until the pattern is formed before trading on its signal.

Latest news

The RBA: keeping the AUD alive?

The Reserve Bank of Australia will publish its statement and announce the interest rate on July 7, at 7:30 MT time.

What will affect markets on July 3?

The overall market sentiment was mixed after the USA recorded the largest increase in virus cases since May 9. The data even offset the better-than-expected NFP.

How to trade on July 2?

The risk-on tone is back on the market again. Let’s look at main trading opportunities.

Deposit with your local payment systems

Learn more

Data collection notice

FBS maintains a record of your data to run this website. By pressing the “Accept” button, you agree to our Privacy policy.

Callback

A manager will call you shortly.

Change number

Your request is accepted.

A manager will call you shortly.

Next callback request for this phone number
will be available in 00:30:00

If you have an urgent issue please contact us via
Live chat

Internal error. Please try again later

Don’t waste your time – keep track of how NFP affects the US dollar and profit!

Beginner Forex book

Beginner Forex book will guide you through the world of trading.

Beginner Forex book

The most important things to start trading
Enter your e-mail, and we will send you a free Beginner Forex book

Thank you!

We've emailed a special link to your e-mail.
Click the link to confirm your address and get Beginner Forex book for free.

You are using an older version of your browser.

Update it to the latest version or try another one for a safer, more comfortable and productive trading experience.

Safari Chrome Firefox Opera