Jump to content

Welcome to the new Traders Laboratory! Please bear with us as we finish the migration over the next few days. If you find any issues, want to leave feedback, get in touch with us, or offer suggestions please post to the Support forum here.

  • Welcome Guests

    Welcome. You are currently viewing the forum as a guest which does not give you access to all the great features at Traders Laboratory such as interacting with members, access to all forums, downloading attachments, and eligibility to win free giveaways. Registration is fast, simple and absolutely free. Create a FREE Traders Laboratory account here.

RichardCox

Harmonic Trading Patterns – The ABCD Structure

Recommended Posts

Harmonic trading uses Fibonacci relationships to spot potential reversal points in price activity. There are a variety of harmonic patterns that have been discovered - relatively recently, in some cases. The patterns are useful in the ways they help to identify buying and selling opportunities in any market and on any time frame.

 

The patterns can be used for a variety of strategies, including intraday, swing, and position methods. An additional advantage of harmonic trading is that is allows traders to determine risk vs. reward ratios before trades are placed. With the harmonic method, the strongest trading signals occur when the harmonic structures coincide with other patterns (either on the same time frame or with those seen on multiple time frames).

 

The ABCD Structure

The simplest of these structures is called the ABCD pattern, where high probability trading setups occur as the pattern completes at the D point. Both the bull structure and the bear structure can be seen in the examples below:

 

BullABCD.png

 

BearABCD.png

 

Without looking at the specific Fibonacci relationships, we can see that at each reversal point (at A, B, C, and D) prices make a significant high or low, creating three coinciding swings in price and forming a dominant trend, comprised of three distinct “legs”. These legs are classified as leg AB, leg BC, and leg CD. The BC leg is a corrective retracement, while the dominant trend is characterized by the behavior of the movement seen in legs AB and CD.

 

Looking at the Fibonacci levels within these legs, we can see that leg BC retraces to 0.618 of the move seen in leg AB. The following movement at leg CD should be equal to the 1.272 Fibonacci extension of the move seen in leg BC. Traders should wait until the move reaches completion at point D before entering into a new position, as this is the main reversal area. These are the most commonly watched Fibonacci levels with respect to the ABCD structure but there are variations in these, which will be described below.

 

Additional Characteristics

 

In addition to the characteristics described above, the ABCD pattern is seen as ideal when the length of leg AB is equal to the length of leg CD. This is true not only for price, but also for time, as the duration of leg AB should also be equal to that of line CD. This congruity allows the pattern to reach full cohesion.

 

Pattern Variations

 

One key point to remember, however, is that technical analysis in the forex market is not an exact science. Because of this, there are variations that can be seen with the ABCD harmonic pattern. Alternative structures allow the BC leg to retrace 0.786 of CD or to extend to 1.618 of BC.

 

There are three general ways the ABCD pattern can unfold: The AB=CD pattern occurs when legs AB and CD coincide in terms of price and time. The “classic” ABCD pattern is seen when the Fibonacci relationships match the above criteria but the price legs are not equivalent in terms of price and time. Finally, the ABCD Extension pattern is seen when the time of leg CD is 1.272 (or 1.618) times longer than AB, and the price movement of CD is 1.272 (or 1.618) times longer than what is seen in AB.

 

Conclusion

 

The basis of the ABCD pattern is the Fibonacci relationships seen in the proportions of legs AB and CD. These movements allow us to identify an approximate area for where the overall structure will complete. Because of this, coinciding patterns (multiple harmonic patterns on one or multiple time frames) will tend to increase the probability that the identified structures are valid and that reversals will follow.

5aa710e2711ff_BullABCD.png.aeb4f5a9ea9f6e13cfc3d08e1bc137a4.png

5aa710e275392_BearABCD.png.a47a70b355769d33d3e6739bd0e9bb89.png

Share this post


Link to post
Share on other sites

Thx for ur info. Very,very informative. I am literally stepping into Penny Stocks with no market experience at all. Is there any other places to go to understand charting,trends etc. that are helpful to a beginner? Thx again STB

Share this post


Link to post
Share on other sites

Join the conversation

You can post now and register later. If you have an account, sign in now to post with your account.
Note: Your post will require moderator approval before it will be visible.

Guest
Reply to this topic...

×   Pasted as rich text.   Paste as plain text instead

  Only 75 emoji are allowed.

×   Your link has been automatically embedded.   Display as a link instead

×   Your previous content has been restored.   Clear editor

×   You cannot paste images directly. Upload or insert images from URL.


  • Topics

  • Posts

    • YUM Yum Brands stock, nice breakout with volume +34.5%, from Stocks to Watch at https://stockconsultant.com/?YUM
    • Date: 3rd April 2025.   Gold Prices Pull Back After Record High as Traders Eye Trump’s Tariffs.   Key Takeaways:   Gold prices retreated after hitting a record high of $3,167.57 per ounce due to profit-taking. President Trump announced a 10% baseline tariff on all US imports, escalating trade tensions. Gold remains exempt from reciprocal tariffs, reinforcing its safe-haven appeal. Investors await US non-farm payroll data for further market direction. Fed rate cut bets and weaker US Treasury yields underpin gold’s bullish outlook. Gold Prices Retreat from Record Highs Amid Profit-Taking Gold prices saw a pullback on Thursday as traders opted to take profits following a historic surge. Spot gold declined 0.4% to $3,122.10 per ounce as of 0710 GMT, retreating from its fresh all-time high of $3,167.57. Meanwhile, US gold futures slipped 0.7% to $3,145.00 per ounce, reflecting broader market uncertainty over economic and geopolitical developments.   The recent rally was largely fueled by concerns over escalating trade tensions after President Donald Trump unveiled sweeping new import tariffs. The 10% baseline tariff on all goods entering the US further deepened the global trade conflict, intensifying investor demand for safe-haven assets like gold. However, as traders locked in gains from the surge, prices saw a modest retracement.   Trump’s Tariffs and Their Market Implications On Wednesday, Trump introduced a sweeping tariff policy imposing a 10% baseline duty on all imports, with significantly higher tariffs on select nations. While this move was aimed at bolstering domestic manufacturing, it sent shockwaves across global markets, fueling inflation concerns and heightening trade war fears.   Gold’s Role Amid Trade War Escalations Despite the widespread tariff measures, the White House clarified that reciprocal tariffs do not apply to gold, energy, and ‘certain minerals that are not available in the US’. This exemption suggests that central banks and institutional investors may continue favouring gold as a hedge against economic instability. One of the key factors supporting gold is the slowdown that these tariffs could cause in the US economy, which raises the likelihood of future Federal Reserve rate cuts. Gold is currently in a pure momentum trade. Market participants are on the sidelines and until we see a significant shakeout, this momentum could persist.   Impact on the US Dollar and Bond Yields Gold prices typically move inversely to the US dollar, and the latest developments have pushed the dollar to its weakest level since October 2024. Market participants are increasingly pricing in the possibility of a Fed rate cut, as the tariffs could weigh on economic growth.   Additionally, US Treasury yields have plummeted, reflecting growing recession fears. Lower bond yields reduce the opportunity cost of holding non-yielding assets like gold, making it a more attractive investment.         Technical Analysis: Key Levels to Watch Gold’s recent rally has pushed it into overbought territory, with the Relative Strength Index (RSI) above 70. This indicates a potential short-term pullback before the uptrend resumes. The immediate support level lies at $3,115, aligning with the Asian session low. A further decline could bring gold towards the $3,100 psychological level, which has previously acted as a strong support zone. Below this, the $3,076–$3,057 region represents a critical weekly support range where buyers may re-enter the market. In the event of a more significant correction, $3,000 stands as a major psychological floor.   On the upside, gold faces immediate resistance at $3,149. A break above this level could signal renewed bullish momentum, potentially leading to a retest of the record high at $3,167. If bullish momentum persists, the next target is the $3,200 psychological barrier, which could pave the way for further gains. Despite the recent pullback, the broader trend remains bullish, with dips likely to be viewed as buying opportunities.   Looking Ahead: Non-Farm Payrolls and Fed Policy Traders are closely monitoring Friday’s US non-farm payrolls (NFP) report, which could provide critical insights into the Federal Reserve’s next policy moves. A weaker-than-expected jobs report may strengthen expectations for an interest rate cut, further boosting gold prices.   Other key economic data releases, such as jobless claims and the ISM Services PMI, may also impact market sentiment in the short term. However, with rising geopolitical uncertainties, trade tensions, and a weakening US dollar, gold’s safe-haven appeal remains strong.   Conclusion: While short-term profit-taking may trigger minor corrections, gold’s long-term outlook remains bullish. As global trade tensions mount and the Federal Reserve leans toward a more accommodative stance, gold could see further gains in the months ahead.   Always trade with strict risk management. Your capital is the single most important aspect of your trading business.   Please note that times displayed based on local time zone and are from time of writing this report.   Click HERE to access the full HFM Economic calendar.   Want to learn to trade and analyse the markets? Join our webinars and get analysis and trading ideas combined with better understanding of how markets work. Click HERE to register for FREE!   Click HERE to READ more Market news.   Andria Pichidi HFMarkets   Disclaimer: This material is provided as a general marketing communication for information purposes only and does not constitute an independent investment research. Nothing in this communication contains, or should be considered as containing, an investment advice or an investment recommendation or a solicitation for the purpose of buying or selling of any financial instrument. All information provided is gathered from reputable sources and any information containing an indication of past performance is not a guarantee or reliable indicator of future performance. Users acknowledge that any investment in Leveraged Products is characterized by a certain degree of uncertainty and that any investment of this nature involves a high level of risk for which the users are solely responsible and liable. We assume no liability for any loss arising from any investment made based on the information provided in this communication. This communication must not be reproduced or further distributed without our prior written permission.
    • AMZN Amazon stock, nice buying at the 187.26 triple+ support area at https://stockconsultant.com/?AMZN
    • DELL Dell Technologies stock, good day moving higher off the 90.99 double support area, from Stocks to Watch at https://stockconsultant.com/?DELL
    • MCK Mckesson stock, nice trend and continuation breakout at https://stockconsultant.com/?MCK
×
×
  • Create New...

Important Information

By using this site, you agree to our Terms of Use.