Harmonic Patterns [ChartSchool] https://stockcharts.com/school/doku.php?id=chart_school:trading_strategies:harmonic_patterns
The following chart shows another 5-point harmonic pattern (Butterfly Bearish). This pattern is similar to the above 5-point Gartley pattern, but in reverse. Here the pattern is “W”-shaped with “B” being the center (eye) of the pattern. The pattern shows trade entry, stop and target levels from “D” levels using the “XA” leg.
List of Harmonic Patterns
- ABC Bullish/Bearish
- AB=CD Bullish/Bearish
- 3-Drives Bullish/Bearish
- Gartley Bullish/Bearish
- Butterfly Bullish/Bearish
- Bat Bullish/Bearish
- Crab Bullish/Bearish
- Shark Bullish/Bearish
- Cypher Bullish/Bearish
The basic Fibonacci ratio or “Fib ratio” is the Golden Ratio (1618). Fibonacci numbers are a sequence of numbers where each number is the sum of the previous two numbers.
The series of Fib Numbers begin as follows: 1,1,2,3,5,8,13,21,34,55,89,144,233,317,610….
There are plenty of materials and books about the theory of how these numbers exist in nature and in the financial world. A list of the most important Fib ratios in the financial world, which are derived by squaring, square-rooting and reciprocating the actual Fibonacci sequence, is shown below.
Key set of Fibonacci-derived ratios in trading: 0.382, 0, .618, 0.786, 1.0, 1, 1, 2.0, 2.62, 3.62, 4.62
Secondary set of Fibonacci-derived ratios in trading: 0.236, 0, 0886, 1.13, 2.236, 3.14, 4.236
There are many applications of Fibonacci in technical analysis. Some of the applications include Fibonacci retracements, Fibonacci projections, Fibonacci Fans, Fibonacci Arcs, Fibonacci Time Zones and Fibonacci Price and Time Clusters, among others.
Most trading software packages have Fibonacci drawing tools which can show Fibonacci retracements, extensions and projections. Additionally, Fibonacci numbers can also be applied to “time” and “price” in trading.
The graphic below illustrates how Fibonacci ratios are used to apply retracement, extension, projection and expansion swings.
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