How to Trade using Harmonic Price Patterns

By | October 2, 2014

How to trade ABCD Harmonic Pattern

 

There are three basic steps in spotting Harmonic Price Patterns:

  • Step 1: Locate a potential Harmonic Price Pattern
  • Step 2: Measure the potential Harmonic Price Pattern
  • Step 3: Buy or sell on the completion of the Harmonic Price Pattern

By following these three basic steps, you can find high probability setups that will help you grab good profits.

Let’s see this process in action!

Step 1: Locate a potential Harmonic Price Pattern

I have shown Hourly chart of Ambuja Cement and market the potential harmonic pattern in forming

ABCD

At this point in time, we’re not exactly sure what kind of pattern that is. It LOOKS like a three-drive, but it could be a Bat or a Crab…

 

Step 2: Measure the potential Harmonic Price Pattern

 

Using the Fibonacci tool, a pen, and a piece of paper, let us list down our observations.There are many Amibroker AFL and Software Available which can do the trick for you.

ABCD_1

  1. Move AC is .618 retracement of move AB.
  2. Move CD is 1.618 extension of move BC.
  3. The length of AB is roughly equal to the length of CD.

This pattern qualifies for a bullish ABCD pattern, which is a strong buy signal.

Step 3: Buy or sell on the completion of the Harmonic Price Pattern

ABCD_1

Once the pattern is complete, all you have to do is respond appropriately with a buy or sell order.

In this case, you should buy at point D, which is the 1.618 Fibonacci extension of move CB, and put your stop loss a couple of points  below your entry price.

Is it really that easy?

Not exactly.

The problem with harmonic price patterns is that they are so perfect that they are so difficult to spot, kind of like a diamond in the rough.

More than knowing the steps, you need to have hawk-like eyes to spot potential harmonic price patterns and a lot of patience to avoid jumping the gun and entering before the pattern is completed.

8 thoughts on “How to Trade using Harmonic Price Patterns

  1. Bramesh Post author

    We have developed a program in Amibroker which we use for Harmonic Scanning and Trading..

  2. Kush

    Hi Bramesh, would you kindly let me know which software I should use for the Indian Stock market, and only for Harmonic Pattern trading. I am familiar with Harmonic trading, but since I do not have a software for Harmonics, I ‘eye-ball’ patterns.
    I am using Metastock Ver 10.1 at the moment.
    Your help will be greatly appreciated

  3. sanjay

    hello bramesh,from where i will get the formula (codes) for pattern reconization in ninja trader…

  4. Dr Indrajirt Chakraborty

    Bramesh, it is very beautiful tutorial. I got an afl for harmonic trading from internet, but that is not very good. Can you tell me feom where I can get a very good afl on harmonic pattern?

  5. Aditi S Jain

    Dear Sir, I studied some patterns today. Axis bank – to be shorted and ICICI bank to be brought(Bull ABCD and Bat). Tatapower has bull patterns (Bull ABCD and Bat). Is that right sir?? Please confirm my pattern analysis.

  6. Haresh w

    Thank you very much for giving wonderful information about very good harmonic pattern very good and simple accurate information
    Hopefully looking for more simple information about more harmonic pattern as it is most reliable pattern if your eyes look correctly with your mind not heart !!!
    Regards
    Haresh Baraiya

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