Basic trading strategy using the Harmonic AB = CD + Fibonacci pattern - cryptoacademy S4W2 - Homework position for @lenonmc21

Good morning everyone. Today I will be participating in the steemit cryptoacademy season 4 week 2 Assignment by @lenonmc21. The Topic for today is about "The Basic Trading Strategy using the harmonic AB = CD + Fibonacci pattern. I will be answering the following questions based on it.

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Harmonic Trading are used in technical analysis to construct geometric pattern on the chart that involves swings and retracement which are gotten through "Fibonacci retracement" that helps traders to be aware about the trend reversal point, potential price movement and identifying key turning points in the market. Harmonic Trading also helps the traders to know when a price may go next. Harmonic Trading can be used in different Financial market such as forex market, stocks and commodities. Operating with harmonic Trading requires patience though it is not 100% accurate because the Market works with human psychology and no one can predict the human mind accurately, like I said it requires patience to understand because each pattern has a specific trading strategy attached to it which includes Stop-losses, profit targets and entry points.

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Fibonacci tool is important in harmonic Trading.

What is Fibonacci retracement ?

Fibonacci retracement are parts of technical analysis which predict future price in the market and it is used by traders to identify the upcoming resistance and support which are gotten from past price action. An upcoming resistance and support cannot be identify without the historical price action.

There are different types of harmonic Trading which are:

• AB = CD Bullish/Bearish.
• ABC Bullish/Bearish.
• Butterfly Bullish/Bearish.
• Bat Bullish/Bearish.
• Shark Bullish/Bearish.
• Gartley Bullish/Bearish.
• Shark Bullish/Bearish.
• Crab Bullish/Bearish.

But today we would be discussing on AB = CD Bullish/Bearish.

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The AB = CD harmonic Pattern was discovered by H.M GARTLEY. HM.GARTLEY created the harmonic chart pattern in 1935, the AB = CD pattern is mostly used to help traders determines high and low which means the pattern has four movement "A,B,C and D". They form a signal movement to notify the trader when it is time to operate in long operation which is to buy asset when the price is relatively low and there is a chance for the price to go up in the nearest future or it may notify the trader on short operation which means the sell assets because it is high in price and there is a chance for it to fall so to avoid loss this step is taken by the traders through the pattern.

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Identification of AB = CD pattern can be divided into two.

_{Chart gotten from tradingview}
1). AB = CD Bullish:
First off Bullish means when a trader believe the price will go higher from the current position, Bullish means buying like placing orders.
In AB=CD BULLISH to know the next future Bullish movement, the current price has to fall / go down. Indication is done through point A,B,C and D. You have to find the 4 points that are decreasing together at the same price rate, to verify if it is valid and clear we have to use the Fibonacci retracement and there are some specific steps to be considered.

• In the movement A and B, there must be no Secondary movement that goes beyond point A or point B.

• Point C must be lower than point A. Fibonacci retracement of the AB movement must be from 61.8% and 78.6%.

• Point D must be between 127.2% and 161.8% if the Fibonacci retracement of the movement between BC.

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Bearish means the trader thinks the price will go lower from the current position. Bearish means selling like selling off an asset to avoid loss in the nearest future. In AB=CD BEARISH to know the next future Bearish movement, the current price has to rise/ go up. Like I said earlier Indication is done through point A,B,C and D. You have to find the 4 points that are increasing together at the same price rate, to verify if it is valid and clear we have to use the Fibonacci retracement and there are some specific steps to be considered though it is the same as the AB=CD BULLISH but a few adjustments.

• In the movement A and B, there must be no Secondary movement that goes beyond point A or point B.

• Point C must be higher than point A. Fibonacci retracement of the AB movement must be from 61.8% and 78.6%.

• Point D must be between 127.2% and 161.8% if the Fibonacci retracement of the movement between BC.

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• Identify the 4 movement ( A,B,C and D).
• After that has been found apply the Fibonacci retracement, remember point C must be between 61.8% and 78.6% and point D must be between 127.2% and 161.8%.
• After point D has been determined and there is a Bearish candle the trader can enter the market.

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• To exit the market we must configure our stop loss to be 2% above or below our point D.
• Also if we have a risk point of 2% below or above our point D, there must also be 2% take profit.

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• working with cryptocurrency (BTC/USD).
  
  

  _{Chart gotten from tradingview}

• Applying Fibonacci retracement on point C.
  
  _{point c in between 61.8% and 78.6%}

• Applying Fibonacci retracement on point D.
  
  _{point D in between 127.2% and 161.8%}

• Market entry.

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• working with cryptocurrency (BTC/USD).
  

• Applying Fibonacci retracement on point C.
  
  _{point c in between 61.8% and 78.6%}

• Applying Fibonacci retracement on point D.
  
  _{point D in between 127.2% and 161.8%}

• Market exist.
  

Harmonic Trading is necessary for a trader to understand which requires alot of patience though it is not 100% accurate. With the help of harmonic Trading, traders can study the price movement. Thank you prof @lenonmc21 for the lecture till next time.