I am a full time trader and trade basically the harmonic patterns and trend pullbacks…I know these are advance strategies, but that shouldn’t be an issue just read the entire post and see how I dissect it, even if you’re still a newbie….
This tutorial is going to be in series…but first off we’re going to start with Harmonics and trickle down to trend pullbacks. I am going to show you all how to easily identify these patterns with ease on the chart and best point to enter a trade….Just read on!
Areas We’re Going To Cover on Harmonic Patterns:
1. What is Harmonic Pattern
2. Tools to work with
3. Types of Harmonic Pattern and How to Trade Them
4. Potential Reversal Zone and
5. Entering a trade with precision
What is Harmonic Pattern:
Harmonics is the method of identifying the market’s rhythm or its pulse. There are certain patterns that tend to repeat themselves over and over again. It is our job as technical traders to identify them and trade them. The principles of harmonics along with ratios cannot be over emphasized. They work on any instruments and timeframes. So in essence we learn to focus more on the only thing that matters on a chart which is, PRICE.
Tools To Work With:
Fibonacci Retracement: Fibonacci retracement is a very popular tool among technical traders and is based on the key numbers identified by mathematician Leonardo Fibonacci in the thirteenth century…this tool is freely available on all metatrader platforms. In technical analysis, Fibonacci retracement is created by taking two extreme numbers on a Forex or stock chart and dividing the vertical distance by the key Fibonacci ratios of 23.6%, 38.2%, 50%, 61.8% and 100%. Once these levels are identified, horizontal lines are drawn and used to identify possible support and resistance levels…Please you can run Google to get more information on tool…
The above image shows how a Fibonacci tool looks like,our job is to use this tool in identifying or measuring turning points on the price chart…open your metatrader platform and use the following inputs:
These are Retracement levels we are interested in: 38.2%, 50%, 61.8%, 78.6%, 88.6% and
Extensions or Projections Levels are: 113%, 127%, 161.8%, 261.8%, 314%, 361.8%.
RSI: The RSI was discovered by Welles Wilder in the 1970s. Although it is recognized as a momentum oscillator, RSI is typically considered one of the most popular indicator studies available today. The RSI was devised by Wilder as a means of calculating the change in momentum of price movement as it relates to a predetermined time period. RSI is a price-following oscillator that ranges between 0 and 100. The RSI typically peaks above 70 and bottoms below 30, and it usually forms these readings before the underlying price chart…
We shall be using this tool to identify market extremes- by
extremes I mean oversold(Bearish) and overbought(Bullish) and using the RSI
default settings to pin point our entries.
The next post is going to be on Types of Harmonic Pattern and How to Trade
Them…Use the comment box below to express yourself!