Basic trading strategy using the Harmonic AB = CD + Fibonacci pattern – Crypto Academy / S4W2 - Homework post for @lenonmc21 by @olawole111.
Good day steemians trust our day was good, welcome to my season 4 week two on the assignment topic Basic trading strategy using the Harmonic AB = CD + Fibonacci pattern lectured by professor @lenonmc21, enjoy as you read through.
Define in your own words what Harmonic Trading is?
Harmonic trading was established far back as 1932 by H.M. Gartley ,is a trading pattern that shows how market goes repeatedly of market movements and trends,over and over,(repeatedly) it can be use to determine reversal and continuations of a trend .
Also, it derive projections and retracment of key resistance and support level using the swing high and swing low point .
Harmonic trading pattern is used along side with the Fibonacci retracement to determine entry and exit point, harmonic pattern .
Define and Explain what the pattern AB = CD is and how can we identify it?
This pattern emanates from four movements namely A , B, C and D and are use to represent different levels on the chart, this movement will always repeat it self ,thereby give trader's opportunity to take an entry point and before
an entry or exit point can be taken it must be
endured that the set up is valid by using Fibonacci retracment , when traders spot this patterns they uses than to make their next trading decision.
Clearly describe the entry and exit criteria for both buying and selling using the AB = CD pattern?
- FOR A BUY CRITERIA
Using the point A,B,C and D levels together with the Fibonacci retracement we can easy identify our entry and exit point but before doing that we need to check whether our setup is valid.
Our point C must be between the range of 61.8 and 78.6 on the Fibonacci retracement and like wise our point D must be between the range of 127% and 161% for us to really know that all our points are really valid if it does not follow the above configuration it means we need to look for another valid setup to get the proper entry.
Haven satisfied that our above points are valid the we can now take an entry point.
To take an entry point, our entry point will be after point D has formed then Place our take profit will be 2% above our point D and this will lead us to where our stop loss will also be, our stop loss will be there 2% below point D.
- FOR A SELL CRITERIA
To take an exit point there are some key levels we have to know using the Fibonacci retracement , the market has to be in an uptrend then we identify our point A,B , C and D
After getting to know our four points then we have to make use of the Fibonacci retracement tool to know maybe our pattern is valid or not.
Now if we want to know whether our pattern is valid or not our point C must be between 61.8 and 78.6 of the Fibonacci level and we need to check same for point D also that is falls between 127.2% and 161.8% of the Fibonacci level.
Now to confirm our entry point and entry point must be at point D and our take profit will be 2% above our point D and this will lead us to where our stop loss will also be, our stop loss will be there 2% below point D.
PRACTICALS
Make 2 entries (Up and Down) on any cryptocurrency pair using the AB = CD pattern confirming it with Fibonacci.
- for sell trade
We will be stimulating a trade with the harmonic pattern ABCD using the Fibonacci tool , the chart must be an uptrend ,after we've gotten our points the we wait for the last point D to form after forming we will place our entry order at D with 2% stop loss and 2% take profit depending on the ratio we want to use.
- For a buy trade
This first thing to note is that the chart must be in a downtrend. then we will pick our point ABCD , thereafter at point D we take our entry then put 2% take profit above and 2% stop loss before taking the order.
CONCLUSION
Finally, harmonic pattern is a very useful pattern all trader should know and the most important thing is how to combine it with the Fibonacci retracement tool to give us a better entry.
NB; All screenshots are from tradingviw.
Cc @lenonmc21