AB=CD Harmonic Patterns Education

Thankfully, there are some online tools available to help you identify these patterns more easily. To trade or invest using the ABCD pattern, you have to identify the indicator, conduct further research and then set your trading alerts. Notice that in this example, the ABCD extension from C to D occurs in 16 bars vs the 10 bars for the AB. That gives us a nice 161.8% compared to the first leg (AB).

The B to C leg (BC leg) meanwhile, represents pullbacks and consolidation of value. These patterns can go both ways https://www.bigshotrading.info/ and can thus be bullish or bearish. Depending on which it is, the investor will either buy or sell at the D point.

ABCD Pattern Indicator MT4

Or, if you decide to trade the classic pattern by shorting at D, you’ll still need to monitor the stock. In this tutorial, we’ll cover all the bases and discuss the basics of the abcd pattern and how to trade it. Each of the four points (ABCD) represent a significant high or low in terms of price on the chart.

Consequently any person acting on it does so entirely at their own risk. Any research provided does not have regard to the specific investment objectives, financial situation and needs of any specific person who may receive it. Although we are not specifically constrained from dealing ahead of our recommendations we do not seek to take advantage of them before they are provided to our clients. See full non-independent research disclaimer and quarterly summary. Traders of the harmonic pattern might look for price reversal at point D, to trade with the expectation of a short term rebound on the index. It’s important to remember that you shouldn’t use the ABCD trading pattern in isolation when speculating on future price movements.

ABCD Pattern Example #3: Newegg Commerce Inc. (NASDAQ: NEGG)

An example of an advanced technique is using a combination of the ABCD pattern, Fibonacci retracements, and trend lines to identify potential entry and exit points. For instance, a trader might use a bullish ABCD pattern and identify the price target using Fibonacci retracements. They might also draw trend ABCD Chart Pattern lines to identify potential support and resistance levels. By combining these tools and strategies, traders can increase the accuracy of their trading decisions and improve their overall trading performance. The chart above shows the bullish ABCD pattern being easily identified with the zig-zag indicator.

• These can alert you when the stock reaches a value set by you, which is why it is so important to do the research beforehand.
• The ABCD pattern is simple … but it can be difficult to master.
• As with the bullish ABCD pattern, the bearish pattern begins with a sharp move to the upside.
• The ABCD pattern has three swings and two peaks, the A/C points, and the troughs have B/D points in the bullish ABCD pattern.
• The bullish ABCD pattern forms during a downward trend and indicates a potential price reversal,  meaning the beginning of a bullish trend.