Skip to main content

Harmonic Patterns

Introduction​

Harmonic patterns are advanced chart patterns that use Fibonacci ratios to identify potential reversal points in the market. These patterns are highly precise and are used by traders to predict future price movements. Below are descriptions of some of the most popular harmonic patterns: Gartley, Butterfly, Bat, 5-0, Crab, Cypher, and Shark.

Gartley Pattern​

Gartley

Pattern Formation​

The Gartley pattern is one of the most well-known harmonic patterns. It consists of four price swings and resembles an "M" or "W" shape. The pattern is identified using specific Fibonacci retracement and extension levels.

Key Components​

  1. XA Leg: The initial price move.
  2. AB Leg: A retracement of the XA leg, typically 61.8%.
  3. BC Leg: A retracement of the AB leg, typically 38.2% or 88.6%.
  4. CD Leg: An extension of the BC leg, typically 127.2% or 161.8%.

Trading Implications​

The Gartley pattern signals a potential reversal at point D. Traders often enter a trade at this point, with a stop-loss just beyond it. The target is usually set at the 38.2% or 61.8% retracement of the CD leg.

Butterfly Pattern​

Butterfly

Pattern Formation​

The Butterfly pattern is similar to the Gartley but has a more extended CD leg. It also forms an "M" or "W" shape and is identified using specific Fibonacci levels.

Key Components​

  1. XA Leg: The initial price move.
  2. AB Leg: A retracement of the XA leg, typically 78.6%.
  3. BC Leg: A retracement of the AB leg, typically 38.2% or 88.6%.
  4. CD Leg: An extension of the BC leg, typically 161.8% or 224%.

Trading Implications​

The Butterfly pattern signals a potential reversal at point D. Traders often enter a trade at this point, with a stop-loss just beyond it. The target is usually set at the 38.2% or 61.8% retracement of the CD leg.

Bat Pattern​

Bat

Pattern Formation​

The Bat pattern is a variation of the Gartley pattern with a more precise Fibonacci retracement level for the AB leg. It also forms an "M" or "W" shape.

Key Components​

  1. XA Leg: The initial price move.
  2. AB Leg: A retracement of the XA leg, typically 38.2% or 50%.
  3. BC Leg: A retracement of the AB leg, typically 38.2% or 88.6%.
  4. CD Leg: An extension of the BC leg, typically 161.8% or 261.8%.

Trading Implications​

The Bat pattern signals a potential reversal at point D. Traders often enter a trade at this point, with a stop-loss just beyond it. The target is usually set at the 38.2% or 61.8% retracement of the CD leg.

5-0 Pattern​

5-0

Pattern Formation​

The 5-0 pattern is a newer harmonic pattern that consists of five price swings. It is identified using specific Fibonacci retracement and extension levels.

Key Components​

  1. XA Leg: The initial price move.
  2. AB Leg: A retracement of the XA leg, typically 113% or 161.8%.
  3. BC Leg: A retracement of the AB leg, typically 161.8% or 224%.
  4. CD Leg: An extension of the BC leg, typically 161.8% or 261.8%.
  5. DE Leg: An extension of the CD leg, typically 127.2% or 161.8%.

Trading Implications​

The 5-0 pattern signals a potential reversal at point E. Traders often enter a trade at this point, with a stop-loss just beyond it. The target is usually set at the 38.2% or 61.8% retracement of the DE leg.

Crab Pattern​

Crab

Pattern Formation​

The Crab pattern is known for its extreme precision and is identified using specific Fibonacci retracement and extension levels. It consists of four price swings.

Key Components​

  1. XA Leg: The initial price move.
  2. AB Leg: A retracement of the XA leg, typically 38.2% or 61.8%.
  3. BC Leg: A retracement of the AB leg, typically 38.2% or 88.6%.
  4. CD Leg: An extension of the BC leg, typically 261.8% or 361.8%.

Trading Implications​

The Crab pattern signals a potential reversal at point D. Traders often enter a trade at this point, with a stop-loss just beyond it. The target is usually set at the 38.2% or 61.8% retracement of the CD leg.

Cypher Pattern​

Cypher

Pattern Formation​

The Cypher pattern is a newer harmonic pattern that consists of four price swings. It is identified using specific Fibonacci retracement and extension levels.

Key Components​

  1. XA Leg: The initial price move.
  2. AB Leg: A retracement of the XA leg, typically 38.2% or 61.8%.
  3. BC Leg: A retracement of the AB leg, typically 113% or 141.4%.
  4. CD Leg: An extension of the BC leg, typically 78.6% or 127.2%.

Trading Implications​

The Cypher pattern signals a potential reversal at point D. Traders often enter a trade at this point, with a stop-loss just beyond it. The target is usually set at the 38.2% or 61.8% retracement of the CD leg.

Shark Pattern​

Shark

Pattern Formation​

The Shark pattern is a newer harmonic pattern that consists of four price swings. It is identified using specific Fibonacci retracement and extension levels.

Key Components​

  1. XA Leg: The initial price move.
  2. AB Leg: A retracement of the XA leg, typically 113% or 161.8%.
  3. BC Leg: A retracement of the AB leg, typically 161.8% or 224%.
  4. CD Leg: An extension of the BC leg, typically 161.8% or 261.8%.

Trading Implications​

The Shark pattern signals a potential reversal at point D. Traders often enter a trade at this point, with a stop-loss just beyond it. The target is usually set at the 38.2% or 61.8% retracement of the CD leg.

tip

Explore our Combinations section for ideas on combining harmonic patterns with tools like Trend Bars Pro or the Swing Suite for enhanced trading strategies.