I tried to do some research on this topic but it lead to some confusion. How are the lines, say A and B, given fib levels? I looked at the example and am entirely confused. Chart patterns such as the animal or crab, bat, etc… I dont understand how the fib levels are found. Are those fib levels a standard when you see those harmonic patterns?
You can find some useful info at here:
Harmonic Price Patterns | Harmonic Price Patterns | Learn Forex Trading
Fibonacci Who? | Fibonacci | Learn Forex Trading
Elephant, I assume the examples you are referring to are the ones in Babypips school. I found the example images confusing as hell too. I actually had to get my ruler out and measure it on the screen.
But I think i figured it out, and I will explain. Other readers please let us know if you agree with my amazing figuring out confusing stuff skills.
Step 1: Point A to B with Fib Retracement tool to get point C
With the fib tool, start at point A, drag to point B and let go. Point C should be at the 62% retracement for the pattern to be valid.
Step 2: Point A to B to C with Fib Extension tool to get point D
This is confusing for several reasons
Reason 1) Babypips just mentions only two reference points to get to point D, when really, you need 3 reference points. They say points B to C, to get point D. But, with my fib extension too in Metatrader, you need to go from A to B to C in order to see where point D should fall.
Reason 2) The Fib Extension tool in MT4 is actually call Fib Expansion.
Reason 3) Fib Expansion tool in MT4 is tricky to use. Assuming your fib expansion/extension tool works like mine, click point A, then drag to point B and release. Then double click, then it will show you little dots where you need to click the right most dot and drag it to the third reference point, point C.
Reason 4) Fib Expansion tool in MT4 doesn’t have the right levels set by default. After you lay down the Fib, then you gotta right click it and set the levels you need, like the 1.272 level.
Not only does it take all day just to do that, but then it’s pretty hard to find these formation on the charts. Maybe you spend 400 billion hours trying to find one of these little patterns, then spend 400 billion more hours fiddling with your tools to see if it’s a valid pattern, then you realize it retraced to the wrong fib extension level, and then your girlfriend is mad at you because you she wanted you to “watch a DVD” with her, but you just ignored her for 800 billion hours, and you got nothing to show for it.
Hey Rainman, Thanks for the information. It seems to be clearer but I won’t be able to understand it until I apply it. However, what I am using is the Oanda broker paper trade. They have no tools like this whatsoever and I am trying to learn this type of method.
But I have a quick question for you since you replied. For this price pattern to work, the BC line must be around the general area of .618?
You should definitely check out the “30 pips a day keeps your money at bay” thread in the forextown section of this forum.
It deals entirely with the harmonic gartly 222 and butterfly patterns which are, in my opinion, far more accurate than AB=CD patterns by themselves.
The guy who started the thread, TmoneyBags, explains in depth how to find the patterns with Fibs etc.
He also made two videos on YouTube showing how he finds them.
Look up “identify Gartley 222 and Butterfly patterns using fibonacci Part 1 of 2” on YouTube. The video is by KingKaiTrunks (TmoneyBags).
I’ve been seriously studying and demoing forex for about 5 months and that thread definitely clicked with me.
After reading through a good portion of the thread, watching his YouTube videos and practicing, I have been pretty successful at identifying these 2 patterns which have a success rate of about 70%…
But yea definitely check it out, it’s an amazing thread if you are in to harmonic trading.
I would phrase it like point C should fall on the .618 line. But yeah, line BC should end at the .618 retracement level.
I think another confusing thing is the pink dashed lines in that image. To me, it just doesn’t make sense to have them connecting A to C. If I was making those images to teach this stuff, i would have done it way different. But lots of other websites do it like that, so maybe it’s just me.
I use Oanda too. Hi-five slap. I really like their FXTrade platform. It does have Fib Retracement and a few other Fib things I never use. But yeah, it doesn’t have Fib Extension. But you can also use Metatrader with Oanda on the same account. You just have to enable it for your account, then download and install. I use MT4 for more in depth chart analysis, and FXtrade for basic analysis and actually executing trades. MT4 is total crap for placing orders.
If you want to do harmonics and stuff like that which requires Fib Ext, then I think you’ll need to download MT4.
How to confirm the C point? What is the suggested timeframe.
I use time frames30 or even an hour. At time frame 30min i would have to zoom out to see the patterns clearly.
Hey Rainman,
Your help was very useful! However, school of pips makes it a little deceiving as to when to take out your profits. For example. IF i found my harmonic sticks to finally reach D and starts a downtrend(or uptrend) how do I know when to take profit? I generally see retracement levels around the 38.2 to 61.8%. HOw do you approach this?
Great question. Perhaps I’m not the best to answer this because I suck at trading and I have never seen a harmonic pattern in real life. For me, it seems too complicated and time consuming. However maybe a tentative target could be the same distance as the first wave, and trail your stop a bit once price starts going your way.
I kind of played it safe with harmonics because it seems so unpredictable. Expecting profit to hit a certain level is psychological warfare. I ended up playing it safe with all my harmonies by taking profit levels at the 38.25 retrace REGARDLESS of whether it might be higher. I hate losing and I am going to pick pocket this market as much as I can now. However, trend lines and MACD seems to cover my losses or even more. Thanks for the reply and good luck trading RainMan!
if you hate losing i wouldn’t be trading. having a stop at breakeven would not be a losing trade since that money which you gained before it hit the target was never actually your’s. the approach is critical mentally as you can’t just depend on a strategy but also the money management
Some traders will have a losing day, week, month, and etc. Just because I said, “I hate losing,” does not mean I will give up on trading. I trade [B][I][U]SOLELY [/U][/I][/B]on whether the pattern completes. I am in my demo stages and collect vast amounts of knowledge that will help reassure my predictions. Im pretty sure that at the breakeven you still would be losing.