## How To Trade Using Harmonic Patterns

Harmonic Patterns (XABCD Pattern) drawing tool allows analysts created by Harold McKinley Gartley to highlight various five point chart patterns. Users can manually draw and maneuver the five separate points (XABCD). The XABCD points create four separate legs which combine to form chart patterns. The four legs are referred to as XA, AB, BC, and CD.

Each of the five points (XABCD) represent a significant high or low in terms of price on the chart. Therefore, the four previously mentioned legs (XA, AB, BC, CD) represent different trends or price movements which move in opposite directions.

As a result there are four major XABCD chart patterns that are most common. These patterns can be either bullish or bearish. The four major patterns include: Gartley, Butterfly, Crab and Bat.

Before you explore the harmonic pattern we suggest to lean Fibonacci retracement and Fibonacci extension (Expansion).

In your MT4 chart less freely draw this pattern, so you need to use advanced charts that we provide.

Gartley Pattern
Gartley shape when the price action has been going on for an uptrend (or downtrend), but has begun to show signs of correction.

The pattern consists of ABCD pattern bullish or bearish, but preceded by a point (X) which are beyond the point D. Gartley pattern “perfect” has the following characteristics:

1. AB movement should be 61.8% retracement of XA.
2. BC movement should be 38.2% or 88.6% retracement of AB.
3. If BC 38.2% retracement , CD must move 127.2% of BC. Therefore, if BC is 88.6%, the CD should be expanded 161.8% of BC.
4. CD Movement should be 78.6% retracement of XA

Butterfly Pattern
Butterfly pattern made by Bryce Gilmore, perfect Butterfly pattern is defined as the 78.6% Fibonacci retracement AB of XA . Butterfly contains special characteristics:

1. The length of AB should be 78.6% retracement of XA.
2. The length of BC can be 38.2% or 88.6% retracement move from AB.
3. If BC move 38.2% retracement of AB, then CD to be 161.8% of BC. So, if BC is 88.6% moving from AB, then CD should be expanded 261.8% of BC.
4. CD must be 127% or 161.8% of XA.

Crub Pattern
In 2000, Scott Carney, strongly believe in the harmonic pattern, and find the “Crab” / crab.

According to him, this is the most accurate among all the harmonic pattern as Potential Reversal Zone extreme way of movement XA.

This pattern has a high risk and reward because you can put a very tight stop loss. Crab pattern “Perfect” should have the following aspects:

1. The length of AB should be 38.2% or 61.8% retracement of the XA.
2. The length of BC can be 38.2% or 88.6% retracement of the length AB.
3. If the length of BC 38.2% retracement of AB, CD must be 224% of BC. Thus, if the length of BC is 88.6% of the length of AB, then the length of the CD should be 361.8% of BC.
4. CD should be 161.8% of the length of XA.

Bat Pattern
In 2001, Scott Carney find another Harmonic Patterns called “Bat”. The Bat is defined from the 88.6% Fibonacci retracement of the movement XA as Potential Reversal Zone. Bat pattern has the following characteristics:

1. The length of AB should be 38.2% or 50.0% retracement of XA.
2. BC can be either 38.2% or 88.6% retracement of the AB.
3. If retracement BC 38.2% of AB, then CD must 161.8% of BC. Thus, if the BC 88.6% moving from AB, then CD must 261.8% of BC.
4. CD to be 88.6% retracement of XA