Master These 4 Essential Harmonic Patterns in Forex Trading

Description

What are Harmonic Patterns in Forex.

They are formation, shapes, or pattern seen on a price chart. They also comes in distinct shapes. But to  identified them you will need a use my 3 simple techniques first, and then confirm these formation by using specific Fibonacci ratios for each pattern type.

So, the next questions is why use Fibonacci ratios? Here is the answer. It is because Harmonic trading relies on Fibonacci numbers.

Fibonacci ratios are sequence of numbers, broken down into ratios or percentage.  These starts with zero and one, is created by adding the previous two numbers: to the present numbers. The results are increased by the number 3. (0, 1, 1, 2, 3, 5, 8, 13, 21, 34, 55, 89, 144, etc).

"Harmonic trading combines patterns and Fibonacci math into a trading method that is precise and based on the premise that patterns repeat themselves".

The most frequently used Fibonacci ratios are broken down into 2 segments retracement and expansion.

1.Fibonacci Retracement: 0.382, 0.50, 0.618, 0.886. and 0.786

2.Fibonacci Expansion: 1.41, 2.0, 2.24, 1.618, 2.618, 3.14 and 3.618.

It is said that the primary ratios are found in almost all natural and environmental structures and events;

it is also found in man-made structures. Since the pattern repeats throughout nature and within society,

then it is natural that the ratios will be seen in the financial markets, which are affected by the environments and societies in which they trade.

Therefore Harmonic Patterns are ruled -based trading.  Most Harmonic patterns use a 5 point labeling system starting from X,A,B,C,D. Price goes into the opposition direction at the D leg.

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