Harmonic patterns are price shapes where each leg relates to the others by Fibonacci ratios. They aim to predict precise reversal zones.
The ABCD: the building block
Price moves A to B, pulls back to C, then moves to D. The CD leg often equals AB.
The XABCD family
| Pattern | B retraces XA | D completes at |
|---|---|---|
| Gartley | 61.8% | 78.6% of XA |
| Bat | 38.2–50% | 88.6% of XA |
| Butterfly | 78.6% | 127–161.8% of XA |
| Crab | 38.2–61.8% | 161.8% of XA |
Trading harmonics
- The D point is the potential reversal zone. Enter on a reversal candle there.
- Stop beyond the pattern's maximum allowed level.
- First target: the 38.2% retracement of the A–D leg.
Wick says
Harmonics are like constellations. Once you know the shape, you start seeing them everywhere. Make sure the ratios really fit before you trade one!
Key takeaways
- Harmonics use Fibonacci ratios between legs.
- ABCD is the base; Gartley, Bat, Butterfly, Crab add the X leg.
- Trade reversals at D with confirmation.