Hi, my names Sam Knowland and this thread will be about harmonic patterns and price action. The reason I am starting this thread is because i can no longer see any decent harmonic threads on the forums and i think its one of the best ways to trade. Personally I trade with the advanced patterns and some pure price action stuff that i learnt over on ‘FOREX PRICE ACTION’ that Johnathon Fox so kindly started, I still think that that thread is a brilliant place for complete newbies to go and learn the basics of PA trading. I would also like to mention my friend krugman25 and his thread ‘PRICE ACTION THAT MATTERS’ in my opinion Aaron is one of the best traders here at babypips and one of the best i have had the pleasure of speaking with. He has an absolute wealth of knowledge to share and anyone would be well advised to go and take a look at his thread.
Anyway i should really get on with this thread:
So what are harmonic patterns?
They are swings in price measured using various Fibonacci retracements and extensions. An example would be the famous ‘Gartley 222’. I will devote a post to each of the patterns that i trade in due course. In my opinion they offer some of the best set ups and the beauty of them is that the RR is always above 1:2 and historically speaking they have between 60-80% win rates, now you do the math and tell me that’s not appealing. They always have set entries, stops and targets so are truly set and forget trades if thats how you like to trade.
Another of my favourite things about them is that after a little experience with them you can start to use PA methods like SR and Reversal candle sticks to get even higher probability trades.
Now I’m no expert at trading, I’ve been doing it now for coming up to 2 years but i am consistently profitable on a live account, anything you ask me i will endeavour to answer to the best of my ability and am always more then happy to share my knowledge with everyone.
What this thread will encompass:
The basic principles of harmonic trading i.e pattern recognition, identification, measurement and entry.
Trade management.
How to define high probability patterns.
Some basic PA stuff i.e pin bars, engulfing bars, trend recognition, SR levels and basic market structure (Hopefully krugman25 will lend a helping hand).
I will post weekly analysis over the weekends and daily analysis whenever I am able
I hope we can get a nice thread going here were people interested in harmonics and PA can come and share knowledge and make everyone better traders
I have to go to work now unfortunately but i wanted to post a couple of charts just to show what i mean, both of these are bullish bat patterns, i will be looking to go long at the completion of the patterns, my next post will detail exactly what a bat pattern is
Hi icequebe. Well your my first post so would like to thank you for that. In answer to your questions
I will be posting the exact patterns that I trade. How to identify them and how to trade them
No I wont be giving signals, I will be showing setups that I am looking at and trading but this is definitely not a signal service.
I occasionally use some ema’s but they are more from habit then anything else. Sometimes I use them as dynamic SR but thats more for PA stuff
No I didnt purchase this and no I will very definitely not be selling this system. I would like this thread to be a teaching ground. I will never ask for any money, this includes sharing the reading material I have on harmonics.
When I get home I will post some charts demonstrating the RR and the patterns.
You are one of the most talented traders I’ve had the privilege of meeting and getting to know. Out of the various methods and systems you have tested and used you always seemed to naturally move to harmonics so I know this thread is going to be great. It’s good to see another trader who just wants to help the community without strings attached, or as I would call it, no conflicts of interest. I will definitely be creeping your thread and if I get bold enough I may jump in and give harmonics a try on a demo account. Thanks again for taking your valuable time to start up this thread and teach this approach to Forex trading.
Thanks mate, means a lot coming from you. Yeah your right I have always been enjoyed harmonics and feel that with my busy schedule its the best way for me to trade. Ive been keeping up to date with your thread and have to say its coming along amazingly well. Keep up the good work mate and you never know hopefully we can get a few more traders to the consistant profitability that we have
So as promised i’m going to go through the Bat Pattern first
Ok so first things first the basic principles of the advanced patterns are as follows:
They consist of 5 legs marked X, A, B, C and D. X is the start point for the pattern and must be a swing high (for bearish) or swing low (for bullish). The other legs are then measured using Fibonacci retracements or expansions. This is true of all the patterns that i trade, there are other patterns with more or fewer legs but i will go through them at a later date.
The Bat Pattern has the following ratios:
the A-B leg should be less then the .618 and more then the .382 retrace of leg X-A, the ideal is the .500
the B-C leg should be between the .382 and .886 retrace of the A-B leg
the C-D leg should then be between the 1.618 and 2.618 extension of B-C
D should also be the .886 of X-A
this is the image of the Bat pattern taken from Babypips school
this is a Bat pattern in action, this is USDJPY H4 and has not completed yet
so entry is taken from D, in my case i usually set limit orders
the stop loss is placed below X, as D is very close to X in this particular pattern i usually place it below previous (to X) swing lows or 30 pips, this is dependant on the particular pattern but we will go into that later
targets are the .382 and the .618 retracements of C-D
Hey B A, thanks mate. Im going to do some more pattern spesifics and go through some of the patterns that are forming at the moment when I get home tonight
I’m Interested in learning more. Harmonic patterns are very new to me with my only limited knowledge coming from babypips school. From your first example my main question is why/how did you pick that swing low for “X” and not one of the other ones before or after that swing low.
hi tj and welcome to the thread. yeah i first encountered harmonics in the baby pips school but to be honest the way they explain it kinda confused me, theres nothing about targets, stops or entries and nothing about where to look for them.
as I’ve stated before I’m not by any means proclaiming myself to be and expert but i am profitable with these patterns. i don’t exactly have a set rule for picking the low but for me it needs to be a fairly large swing. i like it to be at least to the .382 of the move that caused the low and preferably to at least the .500
i have some reading material on harmonics if your interested
today i thought we could go through one of the most famous patterns there is, the ‘Gartley 222’. This pattern was first observed by H.M Gartley and published in his book ‘profits in the stock market’ in 1940. it is named after the page that its printed on in that book.
over its 74 year history the stats say that this pattern has had roughly a 70% win rate which i think is pretty amazing.
the ratios for this pattern are as follows:
A-B should be the .618 retrace of X-A
B-C should be the 61.8 or .786 retrace of A-B
C-D should be the 1.272 or 1.618 extension of B-C and the .786 of X-A
personaly i think if this pattern reaches D its very high probability, D lines up almost perfectly with the 1.272 extension of B-C and the .786 of X-A. it also lines up with the 1.6300 level, which you can see in the chart below is historically very significant. the blue SR line is the same price as D
I’m really looking forward to your thread. Although I’m not specifically a Harmonics trader, I am very interested in the subject. I have books by Pessavento and Carney, are there other learning sources for Harmonics that you recommend?
hi Hogarste, welcome to the thread. What do system do you normally trade with? i sometimes take PA trades but they have to be very high probability for me to consider them. i mainly learnt from those two guys books to but have found akil stokes on youtube to be very good, fxgroundworks.com has some good free stuff harmonicforex.com has some good commentary
I try to come up with a daily bias based on a variety of S/R tools. I try to identify where the market makers are looking to accumulate positions for liquidity (stop raids), and based on that I look for enries. I like looking for divergence, Supply / Demand zones, Fibonacci retracements (62, 70, 79, 87) as well as some extensions, ab=cd, pivots and candle reading.
I am writing a trading plan, and as it happens, my team at work was just told that we are being outsourced in the summer, so I am planning to go full time trading in July. I think the biggest problem I have is trying to use too many tools at once and over-complicating things. On the flip side, I do believe that having a wide understanding of the various technical tools is makes one more well rounded.
Ill check out the stuff you mentioned. Jason Stapleton has a lot of free content on youtube on harrmonics and structure, and a fellow named Shane Daly has some interesting S/D videos. I really like where you’re planning to take this thread, and I’m really looking forward to following along and getting involved. Culd you mention a little more about the the time zones you look at. Also, spotting a Gartley is fairly easy given the M / W shapes that catch the eye. Then one measures AB to see if its 61.8% of XA, then ab=cd, and D = 78.6 of XA. But in terms of spotting the patterns, even once you memorize them, is there something you can tell newbies (and me) about what you’re looking at specifically when you go through the charts to help you identify them.
Well I have to say that I completely agree with you about more tools makes you more well rounded in your trading. I used to trade just PA setups but found them way too restrictive. I then found harmonics and although it can seem complicated when first starting out I think its actually pretty easy once you have traded with them for a bit. I also like the fact that, apart from finding an X point there is no subjectivity in it. The ratios are set in stone, it gives you a SL, entry and targets. I know Scott Carney looks for reversal signals in the PRZ but personally I usually have limit orders set as im usually pretty busy.
Are you asking about fib time zones? Or which sessions I look for D’s? The only time rule I apply is for gartleys time for ab should equal time for cd. Its just another confirmation really. As for the sessions I dont really have a rule for that. I only trade the hourly upwards so havent really found it to affect me.
as for spotting patterns I really do think its just a case of memorising them and practice. Im going to do a video tonight to show measuring, marking and setting stops, targets and entries.
I would also like to go through fib confluences a little bit but need to be at my computer to do it properly.
And please feel free to contribute and get involved as much as possible. You really seem to know what your talking about and having another experienced trader around can only help things move along
So if you require that B is a 618 and C is a 618 or 786, how often do you actually trade, as these are quite strict parameters? I do know the Aussie formed a 786 bull Gartley under your parameters right before the nonfarm liftoff last week! Overall there may only be 1 or 2 formed under those parameters in a month on the majors.
technically speaking around 400 patterns a day form over all the pairs and timeframes, but that includes abcd’s, three drive, sharks etc… personally i trade 3 patterns, the bat, the gartley and the cypher along with a couple of pa setups. on average i trade around 8-10 patterns a month which is plenty for me. i only take trades that i think are high probability. I’m a great believer of ‘sometimes the best position is no position’
Your point C in video above looks like a nice entry for a bull gartley as well, with point X back in DEC 16. I haven’t checked, but it looks to be roughly a 786.
