Harmonic patterns form the basis of a method of analysis and trading. The foundation for harmonic chart patterns was laid down by H.M. Gartley, a financial analyst and author who published the first developments of this unique approach in his 1932 book, Profits in the Stock Market.

Generally, harmonic patterns have been developed to do two things:

  • Predict price reversals.
  • Predict the length of a move.

This is what makes the action zones relatively easy to understand. If you follow the procedures for each pattern, one that predicts the length of a move, then you can expect a trade able price reversal.

Now, let’s narrow our focus to the patterns themselves. Before we begin, let’s break down a few underlying concepts on which these patterns are based.

Harmonic Patterns Are Based on 5 Price Points:- X, A, B, C, and D.

  •  X is the price at which the pattern begins.
  • A is the next price point (up or down) from X
  • B is a retracement of X and A
  • Cis a retracement of A and B
  • D is the last price point and also the action zone or trigger.

In combination they make 4 legs i.e. XA, AB, BC, CD. You have to measure each price point, making sure that it aligns with a specified Fibonacci model (depending on the harmonic pattern). If points X, A, B, and C measure up, then your action zone is at D. Note that each point or leg of harmonic Patterns has its own remarkable zone so due to volatility in price wicks can be ignored if they pass the levels, but candle closures under the precise zones is important.

There are 8 types of Harmonic Patterns used in technical analysis:

1. Bat Harmonic Pattern:


Description and Rules:

  • AB retracement (of XA) can be between 38.2% and 61.8%.
  • BC can retrace 38.2% to 88.6% of AB but must NOT exceed 88.6%.
  • CD must NOT exceed a 88.6% of XA.
  • If all of the above criteria are satisfied, then D is the action zone to go long on a bullish pattern or short on a bearish pattern.
  • Stop loss might be placed below (or above, if short) X.
  • Take profits can be set by placing Fibonacci retracement from point A to D, first Tp can b 38.2% level, second Tp be 50% level & third can be 61.8% level.

2. Alternative Bat Harmonic Pattern:


Description and Rules:

  • AB retracement (of XA) can be up to 38.2% but must NOT exceed it.
  • BC can retrace 38.2% to 88.6% of AB but must NOT exceed 88.6%.
  • CD can be extended to 113% of XA.
  • If all of the above criteria are satisfied, then D is the action zone to go long on a bullish pattern or short on a bearish pattern.
  • Stop loss might be placed below (or above, if short) D.
  • Take profits can be set by placing Fibonacci retracement from point A to D, first Tp can b 38.2% level, second Tp be 50% level & third can be 61.8% level.

3. Gartley Harmonic Pattern:


Description and Rules:

  • AB retracement (of XA) can be between 61.8% to 78.6%
  • BC can retrace 38.2% to 88.6% of AB but must NOT exceed 88.6%.
  • CD can be extended to 78.6% of XA but must not exceed it.
  • If all of the above criteria are satisfied, then D is the action zone to go long on a bullish pattern or short on a bearish Pattern
  • Stop loss might be placed below (or above, if short) X.
  • Take profits can be set by placing Fibonacci retracement from point A to D, first Tp can b 38.2% level, second Tp be 50% level & third can be 61.8% level

4.Carb Harmonic Pattern:

Description and Rules:

  • AB retracement (of XA) can be between 38.2% to 61.8%
  • BC can retrace 38.2% to 88.6% of AB but must NOT exceed 88.6%.
  • CD can be extended to 161.8% of XA but must not exceed it.
  • If all of the above criteria are satisfied, then D is the action zone to go long on a bullish pattern or short on a bearish Pattern.
  • Stop loss might be placed below (or above, if short) D.
  • Take profits can be set by placing Fibonacci retracement from point A to D, first Tp can b 38.2% level, second Tp be 50% level & third can be 61.8% level.

5.Deep Crab Harmonic Pattern:


Description and Rules:

  • AB retracement (of XA) can be extended to 88.6% but must not exceed it.
  • BC can retrace 38.2% to 88.6% of AB but must NOT exceed 88.6%.
  • CD can be extended to 161.8% of XA but must not exceed it.
  • If all of the above criteria are satisfied, then D is the action zone to go long on a bullish pattern or short on a bearish Pattern.
  • Stop loss might be placed below (or above, if short) D.
  • Take profits can be set by placing Fibonacci retracement from point A to D, first Tp can b 38.2% level, second Tp be 50% level & third can be 61.8% level.

6.Shark Harmonic Pattern:


Description and Rules:

  • AB retracement (of XA) can be between 38.2% to 61.8%.
  • BC can retrace between 113% to 161.8% of AB.
  • CD can be extended to 88.6% to 113% of XA but must not exceed it.
  • If all of the above criteria are satisfied, then D is the action zone to go long on a bullish pattern or short on a bearish Pattern.
  • Stop loss might be placed below (or above, if short) D.
  • Take profits can be set by placing Fibonacci retracement from point C to D, first Tp can b 38.2% level, second Tp be 50% level & third can be 61.8% level.

7.Cypher Harmonic Pattern:


Description and Rules:

  • AB retracement (of XA) can be between 38.2% to 61.8%.
  • BC can retrace between 127% to 161.8% of fib extension of X to A then back to X
  • CD can be extended to 78.6% of XA but must not exceed it.
  • If all of the above criteria are satisfied, then D is the action zone to go long on a bullish pattern or short on a bearish Pattern.
  • Stop loss might be placed below (or above, if short) X.
  • Take profits can be set by placing Fibonacci retracement from point C to D, first Tp can b 38.2% level, second Tp be 50% level & third can be 61.8% level.

8.Butterfly Harmonic Pattern:


Description and Rules:

  • AB retracement (of XA) can be extended to 78.6% but must not exceed it.
  • BC can retrace 38.2% to 88.6% of AB but must NOT exceed 88.6%.
  • CD can be extended to 127.2% of XA but must not exceed it.
  • If all of the above criteria are satisfied, then D is the action zone to go long on a bullish pattern or short on a bearish Pattern.
  • Stop loss might be placed below (or above, if short) D.
  • Take profits can be set by placing Fibonacci retracement from point A to D, first Tp can b 38.2% level, second Tp be 50% level & third can be 61.8% level.

Related Queries:

  • Harmonic Patterns
  • X, A, B, C, D legs
  • Bat Harmonic Pattern
  • Alternative Bat Harmonic Pattern
  • Gartley Harmonic Pattern
  • Crab Harmonic Pattern
  • Deep Crab Harmonic Pattern
  • Shark Harmonic Pattern
  • Cypher Harmonic Pattern
  • Butterfly Harmonic Pattern
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