Forex Technical Analysis-Combining an ABCD Pattern with Fibonacci Tools
For Forex traders, Harmonic Price patterns are probably the most difficult technical indicators. Harmonic Price patterns take geometric and Fibonacci numbers, 0.618 and 1.272, to identify trend reversals. However, using Harmonic Price patterns to identify where the market is going to reverse may lead Forex traders to very nice profits.
There are quite a lot of Harmonic Price patterns to cover and today I will start from the very basic ABCD pattern for the preparation of other complicated ones. To spot the simplest Harmonic price pattern ABCD, all you need to do is observing the Forex charts closely and applying Fibonacci tool.
First please look at the Forex chart below, they are what forex traders refer to as ABCD patterns. Line AB and CD are called the legs and line BC is named correction or retracement. Select the two ends of AB to spot Fibonacci retracement when price reaches point B, you may see that the price reverses at point C on 0.618 levels; which indicates a strong buy signal for forex traders. After that, select the two ends of BC to spot Fibonacci extension, you may see that the price reverses at point D on 1.272 level; which indicates a strong sell signal for traders.
In the end, there is one thing you need to pay attention to is that line AB is equal to line CD; that is to say, what the time line AB takes is equal to that of line CD. It is not that hard, right? Yeah, but please not be over excited, you may not take any action before the pattern is completed!
