Musical PIP - How Harmonic Patters can make me (and you) to sing

Trading Discussion
1

Hi all!

This new thread is to explore from the beginning the power of harmonic numbers and patterns in Forex (and also Stock) market. Here I’m going to place my trades, my ideas and all the knowledge I acquire during this musical journey. Very thanks to TMoneyBag, Modo, StuPIP and all the traders on the “30 Pips A day Keeps the your money at bay” thread, that introduced me to this wonderful trading method.

I recommend you to read at least the first 10 pages of that thread and the last 10 pages also to see examples of trades and patterns, and to find references of books and other documents.

The basic theory on Harmonic Patterns is that the market repeats itself because it is traded by humans, and we all are wired almost exactly in the deep of our brains. We, as individuals react in a unique way to the external (and internal) stimulus, but as a crowd, we can be predicted with well known rules. This form the patterns in a repeatable, predictable way, you only need to look at the right place and the right time.

This one is the hardest thing. Many thanks to H.M.Gartley, Scott Carney and Leonardo di Pisa that are the fathers of this knowledge. They made discoveries that gives to us a way, based on well defined rules to find this right place and right time.

The harmonic patterns are effective to at least 70%, making it very good way to trade and win. You can use them on Forex, but also on Stocks, Futures and maybe on the birth rate of rabbits and other events in nature.

I consider myself an almost newbie trader, both on stocks and forex, and I’m open to learn from you all, and also to teach what I know.

The rules of this thread are simply:
[ul]
[li]harmonic trading is the principal topic, you can post something about other methods that help improve the trades with harmonic.[/li][li]blames are not permitted, they will be reported ASAP[/li][li]please put your charts when you are explaining a trade or a pattern, because a picture says more than 1000 words.[/li][/ul]Thanks, and welcome!

2

I’m recalculating the stats for harmonic patterns, I include Gartley, Bat, Butterfly, Crab, AltBat and DeepCrab. I’m looking for Three Drives, but until I understand it, it will not be calculated.

Previous stats show this:

winners
total
percent winner
percent loser
pattern

3389
4732
71
28
Crab

2810
3920
71
28
Butterfly

428
597
71
28
DeepCrab

7790
11382
68
31
Gartley

4527
6757
66
33
Bat

This are from any time frame, from 5M to 1D, from all the history I have on my MT4. The total column shows the number of patterns I found, the winners are the number of patterns that reached the target of 38.2CD.

3

This is a current trade I just entered. It is a butterfly with 161.8XAD confluent with 261.8BCD and 161.8AB=CD on CHFJPY 30M

Risk is 21 pips, Reward 21 pips, so it is 1:1

4

This is a new bearish gartley pattern I found on AUDUSD 15M. I’m trading CD leg and hope to trade also the D point.

After a zoom out on the hart, I see that maybe it could be a Crab pattern instead of a Gartley, because there are more confluence on 161.8XAD than on 78.6XAD. The only confluence is AB=CD on the 78.6XAD. I think I’m going to place a limit sell at 78.6 with stop above the 127.2BCD and if the trade is stopped out, then I’m going to place another limit order on the 161.8XAD.

5

Will be following this thread. I too read the “30 Pips A day Keeps the your money at bay” thread a while back even read the Trade What You See book they recommended.

I have always been attracted to this method because I prefer trading by price action but I have never been able to identify the patterns in real time. I can see them clearly after they have formed and completed but I can’t make money on that now can I?!

Hopefully following along with your trades here will help me out. I had given up on this method many times but always keep coming back to it for some reason hopefully this time I can get the hang of it!

6

I’m going to trade this alternate bat on GBP/USD daily view.

From the current point, I’m going to trade the way from C to D, using small trades, entering just after the fibo confluence has been broken and exiting just before the next confluence of fibo level. The stop is placed just before the more recent confluence. That gives to me at least 3 trades on the way down. The first, sell stop order, has a 1:2 RR, 21 pips risked to win 42 pips.

I placed a buy limit at 70.7XAD with a 20 pip stop and a pretty good reward of 125 pips, just at the confluence and 38.2CD on that point. If the stop is triggered then the next buy limit is at 88.6XAD, again with 20 pip stop but now a 214 pip reward. That is going to be the last trade on this pattern, if it breaks the X point, then I’m going to look for other pattern elsewhere.

7

is there any recognition software MQ you may recommend us?

8

I would love seeing reliable software that identifies patterns. I can do a setup in real time on higher timeframes but on 15 and 5 I cannot keep up. There was an indicator that was listed on the other thread but I was unhappy with the results. with hand drawing I am happy with the results but got troublesome to try to keep up with markets and when I try to trade some the D points kept sliding on me

9

Nop, I’m also not happy with the existent indicators. I do trades on higher timeframes also because that. I think the 30M is good place to start, it is slow enough to make calculations by hand, and faster enough to get trades finished on the same day.

10

I’m testing a strategy for “small patterns”. So far, the “big patterns” or normal ones for my strategy requires that the distance from PRZ to 38.2CD be at least 20pips, to have a stop of 20pip and to have a 1:1 risk:reward.

But there are lots of smaller patterns that appears on any pair at anytime, and a lot of them are just very good to ignore them. So I just started a new strategy for them.

This strategy detects the pattern the same way as others, calculate the PRZ based on fibonacci confluences, like bigger ones, but instead of using my default risk, I use a fraction of it, 1/7 of it, because small patterns are more frequent, but also can be stopped easily than bigger ones. I place a fixed stop of 10 pips, and very precise entry with a limit order at the prz. The take profit is also on 38.2CD.

The limit order is placed with an expiration based on the amount of pips needed to reach the entry price plus the spread divided by the number of pips per minute plus 60 seconds. If the pattern is good and the price reaches the entry between this time limit, then it is entered.

Once entered, the stop loss begins to trail. The limit is a pip below (for bull signals) the end of the PRZ or the lowest low from D point to current time, choosing the lower of both. Invert the rule for bear signals.

Once the price is near the TP (7 pips distance), every 20 seconds the stop is trailed 1 pip, to try to capture the most of this small trades, this way, if the move is strong enough, the price will hit the TP, but if it is slow, at least the SL will protect some profits. This is to take in account the rule: “never let a winning trade transform to a losing one”

11

I found after reading the book that TMoneyBag recommended that one way to verify that xAB=CD in time is that they be almost equal, I think a variation of +/- 20% is good enough to consider them almost equal. This was the only validation I was making to determine that a pattern is xAB=CD, but the new think I learned is that if they are not equal, they should be like fibonacci numbers.

For example if AB is 17 bars length and CD=27 bars length, they are not equal by the first rule, but if you divide 17/27 they are 0.629, that is almost the 0.618, so they are xAB=CD in time, and if the size is at least 100AB=CD, the pattern can be considered to fulfill the rule.

I found this pattern:

There you can see that the length in time CD is a lot bigger than AB, so this is not a xAB=CD pattern, but if you change the drawing like this (red trend lines):

then the pattern is still valid, has better symmetry, almost the same slope on AB and CD, and the number of bars of AB=7 and CD=11, 7/11=0.636, pretty near the 0.618. After a little move in bars (only 4 bars) the price reached the 38.2CD, and if you divide your trade in 2 parts, one on 38.2CD and other on 61.8CD, some bars later the price reached the 61.8CD. This risked only about 6 pips to win 23 on the 61.8CD and 17 on 38.2CD, pretty well, isn’t it?

So right now I’m checking this rule before placing a trade, I think this will give better trades :slight_smile:

12

Today I remember myself: Let them run! I have an emotional problem that prevents me to let run the trades until the stop loss or take profit finish them.

The problem I have (and I think a lot of people) have is to exit winning trades before the target is reached, while letting the losing trades to touch the stop. Yesterday I finished early a trade that I was thinking that could be a loser. Today I look at the chart, and the price moved 100 pips from my entry point, I only won 14 pips. And I know this is an emotional problem for me. I have a banner near my desk that says “let them run”, and I continue ignoring it some times.

So for you, please work with your own emotional problems, they are bad to trading. I know harmonic system is a winner, but I’m converting it to a loser because my emotional responses.

13

Today I made three mistakes. First, I entered early on a trade, that had better confluence at another point. Second I placed two orders instead of one (this was an program error, but I made the program, so It’s my error), and another one, once I see that the entry price was wrong, I should be looking for an exit.

The market gave me an opportunity to exit without a loss, and my GREED make the rest.

14

Today I started looking for AB=CD patterns and Three drives patterns in addition of the other 4+2 basic patterns.

This are two of the possible trades I’m going to trade.

On this (NZDJPY) I placed two pendent orders. The low one will become active only if a reversal candlestick appears near it, if it is not activated, then the second one will be the active if the price reaches it.

15

I found a site that shows statistics about the BCD levels touched by almost every combination of retracement of XAB and ABC.

I added to the Harmonic Charter that information. I found that the information is very useful to decide the entry point of a trade.

Lets see this chart. This is a Bat that I have not traded because I was sleeping. The light blue dash-dotted line is the “Best Match Line”, calculated from the stats I said before. The level of 88.6XAD is the theorical PRZ for a Bat. At that point is also a weekly pivot resistance, daily support, 127AB=CD(price) 138.2AB=CD(time) confluent with fibonacci time series and also an 161.8ABC extension.

Look and see what happened

And a bigger picture of the scene

You can see that the X point was a not-to-extreme point, but the pattern was valid. The best match line was touched, but the price didn’t close below it, only touching the 88.6XAD.

16

This other chart was a trade I made, that I placed BEFORE I added the best match line code to the expert.

You can see that this trade was failed, but it could be very profitable if using the best match line to identify that the best point to entry was not the 0.8100 at 100XAD, but the 127.2XAD for a butterfly, with the entry point a little above 127.2XAD, but just on the BCD extension that best match line (BML) said.

17

I'm trading this butterfly on CHFJPY. The best profit target is about 60 pips.

I will post the results of this trade :slight_smile:

by the way, I'm also learning another method, found here: [http://forums.babypips.com/forextown/37963-high-low-swinging.html

N](http://forums.babypips.com/forextown/37963-high-low-swinging.html)ot to trade as my main method, but to use in conjunction with Harmonic Trading, to confirm trades, and possibly to add to the trades.

The market give me a gift! a gap down move!

[

-](http://www.UploadScreenshot.com/image/831603/506498)---------------

The trade finished with a marginal profit of 1 pip. The lessons to learn: If the price needs to cross a pivot line or other strong support level, better to take profits near that place, specially if it is confluent with a fibo level of the pattern.

If I would have take the profits when the price touched the 38.2CD, the profit could have been about 16 pips instead of 1 pip.

18

I’m trading the Aussie. Entered with a bat pattern confirmed with a candlestick reversal on a support. I detected the pattern 1.5 hours previously, that is the beauty of harmonic patterns :slight_smile:

by the way, I was forced to enter this pattern manually because the candle pattern was not detected with my current settings, after this happened, I placed the trade manually, the stop is at the same distance than the target, and I updated my settings to detect this type of candle reversal. I found at the same time on NZDUSD a pattern I was looking for to make exactly the same move with the same type of pattern. Unfortunately I was not able to enter on that trade on time, but the change on the candlestick settings is now detecting that type of reversals. The rule is, for a bullish one, body + lower wick must be 90 percent of the candle size at least. the lower wick must be 23.6 percent of the candle size at least, and the candle must penetrate some levels of support but not close below them.

Invert that for shorts.

19

Today I made about 4 trades. Two winners and two losers. Almost break even. I think i’m improving, having a better plan that fits for my own way, every trade I do is a learning oportunity.

I’m also starting to get confidence on my trade picking capacity so I just started reducing my stop size and now all my trades are going for 1:1.5 risk reward or better.

20

hey medi, good explaination… have a look:

Gartley pattern - table of content
AMPmonitor

they have a lot of info about the harmonic style, I used it because I like it.
I found a lot of people interested in apply it, a lot of indi about it, explaination videos, also a couple of interesting tools: AMP monitor (I have the Iphone version) and KorHarmonics…

I hope it will be useful for traders friends! Have a good day!