Hello, Greetings to all the fellow traders.
Here is a description on Birth of New Trend Tipple Entry Harmonic Pattern Trading Strategy as I promised with one of my fellow traders.
This strategy fits on why harmonic pattern is formed and how we should use the harmonic pattern for our profitable trading.
Please read the strategy below for your own benefits. This will be useful whether you are beginner or experienced.
[B] BNT Triple Entry Harmonic Pattern Trading Strategy[/B]
Universe goes around and around and it repeated itself millions of years even before humans know they did. As with many living and non living creatures on earth and outside earth, any entities in this world will go through somewhat similar fates of the four stages which are birth, growth, mature and death. As an author and developer of Harmonic Pattern Plus software for MetaTrader platform, I learnt the ways of using these harmonic patterns in Forex Trading. Just like I mentioned before, the trend itself will repeat in the cyclical form and in each cycle it will go through the four stages: birth, growth, mature and death. Harmonic Patterns are potential tool can be used to identify the turning point of current trend. The turning point is the timing where new trend are born from old trend. Normally when this happen, the momentum of the market (i.e. from the old trend) is getting weaker and this process will also accompany chaotic market views from all different individual traders. Finally after several attempts from frontiers, the new trend will be born with some movements with high energy.
According to this principle, I devised a triple entry system with Harmonic Patterns. I use Harmonic Patterns as a tool to detect a potential birth of new trend. Although harmonic patterns are not perfect, the patterns definitely have good predictive power. With the detected harmonic patterns, the traders should be very attentive to the potential directional change. In next section I will describe three entry points when the harmonic patterns are formed in your chart.
[B]Three possible Entries with Harmonic Pattern[/B]
First entry, when the harmonic patterns are newly formed literally, all the technical indicators will still give you opposite signal from the old trend. This is where traders with fear with over bought and under sold conditions start to pull their positions. The first entry is where you need to take extra care with your position. In nature, the first entry is close to mean reversion trading. The bottom line here is that you must have stop loss and take profit target here.
Second entry is where crowds will put several attempts to change the trend direction. There might be some noisy. If the turning point from first entry is still intact, this is good sign. At this timing, some fast technical indicators will be helpful to identify entry point. At this point, I recommend to use two moving average cross over as your signal. Here you will also need stop loss for your position. However your take profit might be conditional upon the formation of third entry. Initially you can have take profit then later you can change it.
Third entry is where crowds are more confident about the new trend direction. The trend will start to develop. This is equivalent to growth stage of the four life cycles and this is the most exciting opportunity for trades. Now all the technical indicators will be lined up with new trend and they will be on the same direction as the new trend. I recommend here to use momentum based strategies. You might use MACD or triple exponential moving averages.
First and second entry is equivalent to birth stage of the four life cycles and third entry is equivalent to growth stage of the four life cycles. First entry is close the mean reversion trading. Second and third entries are close to trending following strategy. The first and second entry can occurs at the same time but they can also occur with some time interval. When you trade according to these three entry points, it is important to remember which stage the current market is on. Also question yourself why birth of new trend is highly probably at this stage either using fundamental and technical indicators. Properly using these three entry points with harmonic patterns, there will be high chance you could be right. Identifying harmonic pattern on individual charts is not easy task to do manually.
