Harmonic Pattern

Harmonic patterns are price action patterns where a sequence of price movements follow well-defined ranges of Fibonacci ratios.

The success rate of harmonic patterns is higher compared to the other classic price patterns (triangles, wedges, flags etc.). When traded properly, they offer a high reward-to-risk ratio.

Bat

Bearish Bat

The bearish Bat pattern resembles a W shape. It consists of five points on the chart and can be traded as a retracement and a continuation pattern.

1. The first leg gets formed when the price sharply declines from point X to point A. This is the longest leg of the pattern.
2. The A to B leg should either be approximately 38.2% to 61.8% of the X to A leg. If outside these the pattern is considered invalid.
3. The B to C leg should be a retracement of 38.2% to 88.6% of the movement of A to B. If outside these the pattern is considered invalid.
4. The C to D leg should be an extension of the B to C leg. If B to C is a 38.2% retracement of A to B, then C to D should be a 161.8% extension of B to C. Likewise, If B to C is an 88.6% retracement of A to B, then C to D should be a 261.8% extension of B to C.
5. The X to D leg should be an 88.6% retracement of X to A.

Some traders look for any ratio between the two numbers if the leg has a range, while others will only look for one or the other. For example, above it was mentioned that AB is a 38.2% to 61.8% retracement of XA. Some traders will only look for 38.2% or 61.8%, and disregard numbers in between unless they are very close to these specific numbers.

Where to take profit?

Where you take profit on this pattern is highly subjective and comes down to market conditions and personal strategy.

A common take-profit strategy is to pull a Fibonacci retracement from the low point A to the high point D. Take most profit at the 61.8% retrace level. However, you can also layer your take profits from the 38.2% retrace to the 78.6% retrace.

Possible formations:

Bullish Bat

The bullish Bat pattern resembles an M shape. It consists of five points on the chart and can be traded as a retracement and a continuation pattern.

1. The first leg gets formed when the price sharply rises from point X to point A. This is the longest leg of the pattern.
2. The A to B leg should either be approximately 38.2% or 61.8% of the X to A leg. If outside these the pattern is considered invalid.
3. The B to C leg should be a retracement of 38.2% to 88.6% of the movement of A to B. If outside these the pattern is considered invalid.
4. The C to D leg should be an extension of the B to C leg. If B to C is a 38.2% retracement of A to B, then C to D should be a 161.8% extension of B to C. Likewise, If B to C is an 88.6% retracement of A to B, then C to D should be a 261.8% extension of B to C.
5. The X to D leg should be an 88.6% retracement of X to A.

Some traders look for any ratio between the two numbers if the leg has a range, while others will only look for one or the other. For example, above it was mentioned that AB is a 38.2% to 61.8% retracement of XA. Some traders will only look for 38.2% or 61.8%, and disregard numbers in between unless they are very close to these specific numbers.

Where to take profit?

Where you take profit on this pattern is highly subjective and comes down to market conditions and personal strategy.

Possible formations:

Butterfly

Bearish Butterfly

The bearish Butterfly pattern resembles a W shape. It consists of five points on the chart and can be traded as a retracement and a continuation pattern.

1. The first leg gets formed when the price sharply declines from point X to point A.
2. The A to B leg should either be approximately 78.6% of the X to A leg.
3. The B to C leg should be a retracement of 38.2% to 88.6% of the movement of A to B. If outside these the pattern is considered invalid.
4. The C to D leg should be an extension of the B to C leg. If B to C is a 38.2% retracement of A to B, then C to D should be a 161.8% extension of B to C. Likewise, If B to C is an 88.6% retracement of A to B, then C to D should be a 261.8% extension of B to C.
5. The X to D leg should be an extension of the X to A leg. If C to D is a 161.8% retracement of B to C, then X to D should be a 127.2% extension of X to A. Likewise, If C to D is a 261.8% retracement of B to C, then X to D should be a 161.8% extension of X to A.

Some traders look for any ratio between the two numbers if the leg has a range, while others will only look for one or the other. For example, above it was mentioned that BC is a 38.2% to 88.6% retracement of AB. Some traders will only look for 38.2% or 88.6%, and disregard numbers in between unless they are very close to these specific numbers.

Where to take profit?

Where you take profit on this pattern is highly subjective and comes down to market conditions and personal strategy.

An aggressive take-profit target would be a retrace back to the point A level. A more conservative take-profit target would be at the point B level. However, you can also layer your take profits at the B, C and A levels.

Possible formation:

Bullish Butterfly

The bullish Butterfly pattern resembles an M shape. It consists of five points on the chart and can be traded as a retracement and a continuation pattern.

1. The first leg gets formed when the price sharply rises from point X to point A.
2. The A to B leg should either be approximately 78.6% of the X to A leg.
3. The B to C leg should be a retracement of 38.2% to 88.6% of the movement of A to B. If outside these the pattern is considered invalid.
4. The C to D leg should be an extension of the B to C leg. If B to C is a 38.2% retracement of A to B, then C to D should be a 161.8% extension of B to C. Likewise, If B to C is an 88.6% retracement of A to B, then C to D should be a 261.8% extension of B to C.
5. The X to D leg should be an extension of the X to A leg. If C to D is a 161.8% retracement of B to C, then X to D should be a 127.2% extension of X to A. Likewise, If C to D is a 261.8% retracement of B to C, then X to D should be a 161.8% extension of X to A.

Some traders look for any ratio between the two numbers if the leg has a range, while others will only look for one or the other. For example, above it was mentioned that BC is a 38.2% to 88.6% retracement of AB. Some traders will only look for 38.2% or 88.6%, and disregard numbers in between unless they are very close to these specific numbers.

Where to take profit?

Where you take profit on this pattern is highly subjective and comes down to market conditions and personal strategy.

An aggressive take-profit target would be a retrace back to the point A level. A more conservative take-profit target would be at the point B level. However, you can also layer your take profits at the B, C and A levels.

Possible formation:

Crab

Bearish Crab

The bearish Crab pattern resembles a W shape. It consists of five points on the chart and can be traded as a retracement and a continuation pattern.

1. The first leg gets formed when the price sharply declines from point X to point A.
2. The A to B leg should either be approximately 38.2% to 61.8% of the X to A leg. If outside these the pattern is considered invalid.
3. The B to C leg should be a retracement of 38.2% to 61.8% of the movement of A to B. If outside these the pattern is considered invalid.
4. The C to D leg should be an extension of the B to C leg. If B to C is a 38.2% retracement of A to B, then C to D should be a 261.8% extension of B to C. Likewise, If B to C is an 88.6% retracement of A to B, then C to D should be a 361.8% extension of B to C.
5. The X to D leg should be a 161.8% extension of the X to A leg.

Some traders look for any ratio between the two numbers if the leg has a range, while others will only look for one or the other. For example, above it was mentioned that AB is a 38.2% to 61.8% retracement of XA. Some traders will only look for 38.2% or 61.8%, and disregard numbers in between unless they are very close to these specific numbers.

Where to take profit?

Where you take profit on this pattern is highly subjective and comes down to market conditions and personal strategy.

An aggressive take-profit target would be a retrace back to the point A level. A more conservative take-profit target would be at the point B level. However, you can also layer your take profits at the B, C and A levels. Furthermore, points A, B, and C intersect with Fibonacci retracement levels that you can use.

Possible formations:

Bullish Crab

The bullish Crab pattern resembles an M shape. It consists of five points on the chart and can be traded as a retracement and a continuation pattern.

1. The first leg gets formed when the price sharply rises from point X to point A.
2. The A to B leg should either be approximately 38.2% to 61.8% of the X to A leg. If outside these the pattern is considered invalid.
3. The B to C leg should be a retracement of 38.2% to 61.8% of the movement of A to B. If outside these the pattern is considered invalid.
4. The C to D leg should be an extension of the B to C leg. If B to C is a 38.2% retracement of A to B, then C to D should be a 261.8% extension of B to C. Likewise, If B to C is an 88.6% retracement of A to B, then C to D should be a 361.8% extension of B to C.
5. The X to D leg should be a 161.8% extension of the X to A leg.

Some traders look for any ratio between the two numbers if the leg has a range, while others will only look for one or the other. For example, above it was mentioned that AB is a 38.2% to 61.8% retracement of XA. Some traders will only look for 38.2% or 61.8%, and disregard numbers in between unless they are very close to these specific numbers.

Where to take profit?

Where you take profit on this pattern is highly subjective and comes down to market conditions and personal strategy.

An aggressive take-profit target would be a retrace back to the point A level. A more conservative take-profit target would be at the point B level. However, you can also layer your take profits at the B, C and A levels. Furthermore, points A, B, and C intersect with Fibonacci retracement levels that you can use.

Possible formations:

Cypher

Bearish Cypher

The bearish Cypher pattern resembles a W shape. It consists of five points on the chart and can be traded as a retracement and a continuation pattern.

1. The first leg gets formed when the price sharply declines from point X to point A.
2. The A to B leg should either be approximately 38.2% to 61.8% of the X to A leg. If outside these the pattern is considered invalid.
3. The B to C leg should be an extension of 113% to 141.4% of the movement of A to B. If outside these the pattern is considered invalid.
4. The C to D leg should be an extension of the B to C leg. If B to C is a 113% extension of A to B, then C to D should be a 127.2% extension of B to C. Likewise, If B to C is a 141.4% extension of A to B, then C to D should be a 161.8% extension of B to C.
5. The X to D leg should be a 78.6% retracement of the X to A leg.

Some traders look for any ratio between the two numbers if the leg has a range, while others will only look for one or the other. For example, above it was mentioned that AB is a 38.2% to 61.8% retracement of XA. Some traders will only look for 38.2% or 61.8%, and disregard numbers in between unless they are very close to these specific numbers.

Where to take profit?

Where you take profit on this pattern is highly subjective and comes down to market conditions and personal strategy.

An aggressive take-profit target would be a retrace back to the point C level. A more conservative take-profit target would be at the point B level. However, you can also layer your take profits at the B, A and C levels.

Possible formations:

Bullish Cypher

The bullish Cypher pattern resembles an M shape. It consists of five points on the chart and can be traded as a retracement and a continuation pattern.

1. The first leg gets formed when the price sharply declines from point X to point A.
2. The A to B leg should either be approximately 38.2% to 61.8% of the X to A leg. If outside these the pattern is considered invalid.
3. The B to C leg should be an extension of 113% to 141.4% of the movement of A to B. If outside these the pattern is considered invalid.
4. The C to D leg should be an extension of the B to C leg. If B to C is a 113% extension of A to B, then C to D should be a 127.2% extension of B to C. Likewise, If B to C is a 141.4% extension of A to B, then C to D should be a 161.8% extension of B to C.
5. The X to D leg should be a 78.6% retracement of the X to A leg.

Some traders look for any ratio between the two numbers if the leg has a range, while others will only look for one or the other. For example, above it was mentioned that AB is a 38.2% to 61.8% retracement of XA. Some traders will only look for 38.2% or 61.8%, and disregard numbers in between unless they are very close to these specific numbers.

Where to take profit?

Where you take profit on this pattern is highly subjective and comes down to market conditions and personal strategy.

An aggressive take-profit target would be a retrace back to the point C level. A more conservative take-profit target would be at the point B level. However, you can also layer your take profits at the B, A and C levels.

Possible formations:

Gartley

Bearish Gartley

The bearish Gartley pattern resembles a W shape. It consists of five points on the chart and can be traded as a retracement and a continuation pattern.

1. The first leg gets formed when the price sharply declines from point X to point A. This is the longest leg of the pattern.
2. The A to B leg will not retrace past point X (otherwise the pattern is considered invalid). It should be approximately 61.8% of the X to A leg.
3. The B to C leg should be a retracement of 38.2% or 88.6% of the movement of A to B. The Gartley pattern is invalid if the B to C leg retraces below point A.
4. The C to D leg should be an extension of the B to C leg. If B to C is a 38.2% retracement of A to B, then C to D should be a 127.2% extension of B to C. Likewise, If B to C is an 88.6% retracement of A to B, then C to D should be a 161.8% extension of B to C.
5. The X to D leg should be a 78.6% retracement of X to A.

Some traders look for any ratio between the two numbers if the leg has a range, while others will only look for one or the other. For example, above it was mentioned that BC is a 38.2% to 88.6% retracement of AB. Some traders will only look for 38.2% or 88.6%, and disregard numbers in between unless they are very close to these specific numbers.

Where to take profit?

Where you take profits on this pattern is highly subjective and comes down to market conditions and personal strategy.

A common take-profit strategy is to pull a Fibonacci Retracement from the low point A to the high point D. Take most profit at the 61.8% retrace level. However, you can also layer your take profits from the 38.2% retrace to the 78.6% retrace.

Possible formation:

Bullish Gartley

The bullish Gartley pattern resembles an M shape. It consists of five points on the chart and can be traded as a retracement and a continuation pattern.

1. The first leg gets formed when the price sharply rises from point X to point A. This is the longest leg of the pattern.
2. The A to B leg will not retrace past point X (otherwise the pattern is considered invalid). It should be approximately 61.8% of the X to A leg.
3. The B to C leg should be a retracement of 38.2% or 88.6% of the movement of A to B. The Gartley pattern is invalid if the B to C leg retraces above point A.
4. The C to D leg should be an extension of the B to C leg. If B to C is a 38.2% retracement of A to B, then C to D should be a 127.2% extension of B to C. Likewise, If B to C is an 88.6% retracement of A to B, then C to D should be a 161.8% extension of B to C.
5. The X to D leg should be a 78.6% retracement of X to A.

Some traders look for any ratio between the two numbers if the leg has a range, while others will only look for one or the other. For example, above it was mentioned that BC is a 38.2% to 88.6% retracement of AB. Some traders will only look for 38.2% or 88.6%, and disregard numbers in between unless they are very close to these specific numbers.

Where to take profit?

Where you take profits on this pattern is highly subjective and comes down to market conditions and personal strategy.

A common take-profit strategy is to pull a Fibonacci Retracement from the high point A to the low point D. Take most profit at the 61.8% retrace level. However, you can also layer your take profits from the 38.2% retrace to the 78.6% retrace.

Possible formation:

Shark

Bearish Shark

The bearish Shark pattern is not a typical W-shaped harmonic pattern.

Where to take profit?

Where you take profits on this pattern is highly subjective and comes down to market conditions and personal strategy.

A common take-profit strategy is to pull a Fibonacci Retracement from the low point B to the high point C. Take most profit at the 61.8% retrace level. However, you can also layer your take profits from the 38.2% retrace to the 78.6% retrace.

Possible formations:

Bullish Shark

The bullish Shark pattern is not a typical M-shaped harmonic pattern.

Where to take profit?

Where you take profits on this pattern is highly subjective and comes down to market conditions and personal strategy.

A common take-profit strategy is to pull a Fibonacci Retracement from the high point B to the low point C. Take most profit at the 61.8% retrace level. However, you can also layer your take profits from the 38.2% retrace to the 78.6% retrace.

Possible formations:

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