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Ratios & Harmonics: a Different Way to Trade

  • #2,841
  • Feb 12, 2013 9:54am Feb 12, 2013 9:54am
Thank you. Ok so AB=CD is only if the price goes to and closes between 0.618-0.786AB. If it goes above or below it is the ABCD pattern.

What happens if the retracement goes to 38.2 and goes up slightly and then moves down between .500 and 0.618. Should I redraw my fib extension or leave it?

Thanks a lot.

P.S. Dibo90 - I did watch his videos but got only more confused. I guess he just moves too quickly for me and it all got mixed up big time. But I will definitely watch them all again a few more times.


Quoting itinerant
In the methods used by Mr. Pip (i.e. this thread), the 'ABCD' is a particular AB=CD formation whereby C retraces to 0.618-0.786AB.
If that particular criteria isn't met, it may still be an AB=CD but it is not an 'ABCD'
That's it in a nutshell (I think)
Attached Image (click to enlarge)
Click to Enlarge Name: eurusd 5m chart.gif Size: 15 KB
  • #2,842
  • Feb 12, 2013 10:16am Feb 12, 2013 10:16am
Quoting tropics
Thank you. Ok so AB=CD is only if the price goes to and closes between 0.618-0.786AB. If it goes above or below it is the ABCD pattern.

What happens if the retracement goes to 38.2 and goes up slightly and then moves down between .500 and 0.618. Should I redraw my fib extension or leave it?

Thanks a lot.

P.S. Dibo90 - I did watch his videos but got only more confused. I guess he just moves too quickly for me and it all got mixed up big time. But I will definitely watch them all again a few more times.
the fib extension stays the same, because you're drawing an extension from a to b point, and it doesnt matter where c goes. The copied impulse should move to the new low retracement level. Also, on the chart, you should include the 161.8 zone, not the 127-138, because the impulse is very close to 168. This is confluence - multiple factors converging.
  • #2,843
  • Feb 12, 2013 10:19am Feb 12, 2013 10:19am
I thought Fib retracement was drawn from A to B. Not Fib extension.

Quoting Starry
the fib extension stays the same, because you're drawing an extension from a to b point, and it doesnt matter where c goes. The copied impulse should move to the new low retracement level. Also, on the chart, you should include the 161.8 zone, not the 127-138, because the impulse is very close to 168. This is confluence - multiple factors converging.
  • #2,844
  • Feb 12, 2013 10:21am Feb 12, 2013 10:21am
Quoting tropics
Thank you. Ok so AB=CD is only if the price goes to and closes between 0.618-0.786AB. If it goes above or below it is the ABCD pattern.

What happens if the retracement goes to 38.2 and goes up slightly and then moves down between .500 and 0.618. Should I redraw my fib extension or leave it?

Thanks a lot.

P.S. Dibo90 - I did watch his videos but got only more confused. I guess he just moves too quickly for me and it all got mixed up big time. But I will definitely watch them all again a few more times.
see chart

Attached Image (click to enlarge)
Click to Enlarge Name: prz.png Size: 178 KB
  • #2,845
  • Feb 12, 2013 10:28am Feb 12, 2013 10:28am
Quoting tropics
Thank you. Ok so AB=CD is only if the price goes to and closes between 0.618-0.786AB. If it goes above or below it is the ABCD pattern.

What happens if the retracement goes to 38.2 and goes up slightly and then moves down between .500 and 0.618. Should I redraw my fib extension or leave it?

Thanks a lot.

P.S. Dibo90 - I did watch his videos but got only more confused. I guess he just moves too quickly for me and it all got mixed up big time. But I will definitely watch them all again a few more times.
Reverse your logic. ABCD is only when market reverses between 61.8 and 78.6. A candle closing short of 61.8 or beyond 78.6 is a possible AB=CD, but not a true ABCD. It is very clearly spelled out in his videos. If you did not understand it, watch it again, and again, and again...

More importantly, it is just semantics and the ability for us to discuss patterns with a common understanding. Do not get hung up on these minor factors. More important is watching patterns form, sticking to a pattern, learning the market, practicing, and never giving up.

Jumping around systems, trying to explain price action, calling patterns after the fact, and not giving you full attention will lead to failure--ask me, I know. Grind it out.
  • #2,846
  • Feb 12, 2013 10:34am Feb 12, 2013 10:34am
Ok, so you adjusted the copy(line) of AB leg once the retracement made a lower retracement right? Did you draw your extension from the newest retracement low or the previous one? Since at first the retracement went to 38.2, but then went up and then down to below 50.


Quoting Starry
see chart

Attachment
  • #2,847
  • Feb 12, 2013 10:41am Feb 12, 2013 10:41am
Quoting tropics
Ok, so you adjusted the copy(line) of AB leg once the retracement made a lower retracement right? Did you draw your extension from the newest retracement low or the previous one? Since at first the retracement went to 38.2, but then went up and then down to below 50.
You are making it too complicated. He drew in leg from A to B with fib ratios. Market pulled back to 50% suggesting possible AB=CD. He copied the AB leg to the low of the pullback (point C) to determine possible target point D.

Point C can be anywhere between A and B. You do not know where point C is until either point A or point B is reached. If point A is reached, there is no ABCD pattern. If point B is reached, then the reversal point between A and B = point C.

Look at my journal, there is ~40 charts of ABCD patterns. The points are not labeled, but all the important fib lines are drawn. Some ABCD work, some do not, you do not know until the pattern completes. Read the rules, watch the videos and practice.
  • #2,848
  • Feb 12, 2013 10:48am Feb 12, 2013 10:48am
Ok, I see. The point B has to be reached first for us to determine where point C is. If A is reached, the pattern is broken.

Quoting BroncoCap
You are making it too complicated. He drew in leg from A to B with fib ratios. Market pulled back to 50% suggesting possible AB=CD. He copied the AB leg to the low of the pullback (point C) to determine possible target point D.

Point C can be anywhere between A and B. You do not know where point C is until either point A or point B is reached. If point A is reached, there is no ABCD pattern. If point B is reached, then the reversal point between A and B = point C.

Look at my journal, there is ~40 charts of ABCD patterns. The points...
  • #2,849
  • Feb 12, 2013 10:53am Feb 12, 2013 10:53am
Quoting tropics
Ok, I see. The point B has to be reached first for us to determine where point C is. If A is reached, the pattern is broken.
Exactly, that is why you cannot trade AB=CD with aggressive C entries. Only ABCD can have aggressive C entries because you have a defined location for entry (close between 61.8 and 78.6) and a defined stop zone (any close beyond 78.6). Trying to do the same with C=50.0 or C=38.2 is dangerous with poor risk:reward characteristics.

I leave pending orders at 61.8 with a target at point B and stop at point A. Risk:Reward is 1:1.618. It works for me. Mr. Pip has other rules that work for him. Most importantly, I made my system my own through testing, experience, and he did the same. Blindly copying either system may cause doubt, discomfort, inability to trade it when things get rough.

Good luck, work hard!
  • #2,850
  • Feb 12, 2013 11:08am Feb 12, 2013 11:08am
A possible aggressive c and then an abcd completion...
Attached Image (click to enlarge)
Click to Enlarge Name: $EURUSD (233 Tick) 12-2-2013.jpg Size: 123 KB
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  • #2,851
  • Edited 11:12am Feb 12, 2013 11:10am | Edited 11:12am
Quoting Good2Cu
A possible aggressive c and then an abcd completion...
Exactly, I traded the aggressive C entry, was so close, my EA did not register the trade although the demo market fill algorithm did

EURUSD 5min--
http://farm9.staticflickr.com/8096/8...bb91d823_b.jpg

Sadly, I had two short ABCD tests that countered this win. I will post those tonight with my usual journal update. Still a great trade. Waiting for market to make next move.
  • #2,852
  • Feb 12, 2013 11:27am Feb 12, 2013 11:27am
That makes a whole lot of more sense now. I know that I might be trying to make this more complicated but I still have one more question. Let's look at this scenario: retracement goes down to 38.2 and then above the B point which determines our C point. But then price goes down again to below the C point and up above the B point again. Would this become our new C point now or the old one is locked in?

Quoting BroncoCap
Exactly, that is why you cannot trade AB=CD with aggressive C entries. Only ABCD can have aggressive C entries because you have a defined location for entry (close between 61.8 and 78.6) and a defined stop zone (any close beyond 78.6). Trying to do the same with C=50.0 or C=38.2 is dangerous with poor risk:reward characteristics.

I leave pending orders at 61.8 with a target at point B and stop at point A. Risk:Reward is 1:1.618. It works for me. Mr. Pip has other rules that work for him. Most importantly, I made my system my own through...
  • #2,853
  • Feb 12, 2013 11:39am Feb 12, 2013 11:39am
Quoting tropics
That makes a whole lot of more sense now. I know that I might be trying to make this more complicated but I still have one more question. Let's look at this scenario: retracement goes down to 38.2 and then above the B point which determines our C point. But then price goes down again to below the C point and up above the B point again. Would this become our new C point now or the old one is locked in?
Sorry to be rough about "making it more complicated". I think it is human nature to try to know 'why' vs just accepting it. It has taken much effort to forgo caring about why markets do what they do, and condition myself to ask 'if' or 'will' the market will do what it has done in the past without concern for why

Anyways, this is the key aspect of harmonics, the deciding of what is a wave and what is not is purely subjective. Mr. Pip used highest high and lowest low to determine the main wave. I on the other hand only concern myself with well formed waves (I usually use a moving average and its slope to see what is well formed and what is choppy. I also just compress chop to the main move in my mind--hard to explain). But, you must determine what is a wave and what is not. It is a matter of scale, time, fluidity of movement, etc. If you look back at my charts in my journal, you will see some charts that are very clean, some that are very choppy. Right now I look at every wave that is roughly greater than 15 pips.

Anytime point A or point B is breached, a new wave is forming or the larger wave is in play. I will try to get a chart that shows this.

Here we go EURUSD 5min--
http://farm9.staticflickr.com/8228/8...cd197f55_b.jpg

I traded basically all the red waves, plus some smaller waves (n=8). Another trader may only trade the green waves (n=3). It comes down to what you decide to do as a trader. You can make rules, you can take only those in the direction of the market, what ever, but it is ultimately your decision. And that is the kicker. Mr. Pip nor I can tell you which will work and which will not. You got to put in the time, draw your own waves, and record the results. After 30, 50, 100 waves, you should have some ideas

Good luck!
  • #2,854
  • Feb 12, 2013 11:41am Feb 12, 2013 11:41am
nzd/usd 1h http://i.imgur.com/3hYEHYM.png
  • #2,855
  • Feb 12, 2013 12:08pm Feb 12, 2013 12:08pm
Thanks a lot!!!

Quoting BroncoCap
Sorry to be rough about "making it more complicated". I think it is human nature to try to know 'why' vs just accepting it. It has taken much effort to forgo caring about why markets do what they do, and condition myself to ask 'if' or 'will' the market will do what it has done in the past without concern for why

Anyways, this is the key aspect of harmonics, the deciding of what is a wave and what is not is purely subjective. Mr. Pip used highest high and lowest low to determine the main wave. I on the other hand only concern myself...
  • #2,856
  • Feb 12, 2013 12:16pm Feb 12, 2013 12:16pm
Quoting dibo90
Personally, NT is much faster for me. For copy and paste a line/rectangle/triangle/... you can use the standard Ctrl+C and Ctrl+V. Then each drawing tools has a personal Key from the keyboard, for instance F2 for a line, F8 for Fibonacci retracement, ecc.. The only thing I don't like very much is that I have only 4 digits in the price, and not 5 like in others, but I think this is due to the data provider
There are some definite pros for NT, hence why I said I wish I could get on with it better. I just find it too awkward to manage trades.
Which means that I'll probably be using it for tick data (which isn't possible on MT) but actually trading on a different platform.
Anyway, I'm now guilty of getting way off-topic so I'll stop discussing the merits of MT and NT!
  • #2,857
  • Feb 12, 2013 12:19pm Feb 12, 2013 12:19pm
Quoting kin89
nzd/usd 1h http://i.imgur.com/3hYEHYM.png
Nice job. Same idea, different starting point.
Attached Image (click to enlarge)
Click to Enlarge Name: nzd.jpg Size: 74 KB
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  • #2,858
  • Feb 12, 2013 12:23pm Feb 12, 2013 12:23pm
Can someone please clear confluence mentioned in Rules of Engagement of ABCD pattern which is as follows:

The market forms the (D) completion point by fulfilling at least a one to one harmonic move of the AB leg coming in at a 127.2% extension of AB. For ratio confluence confirmation a measurement of the BC may be taken and the extension should come in at around a 138.2% to a 161.8%.

I have highlighted the the confluence, can some one explain with example or in simple terms...

Thanks,
Ali
  • #2,859
  • Feb 12, 2013 12:32pm Feb 12, 2013 12:32pm
Quoting kin89
nzd/usd 1h http://i.imgur.com/3hYEHYM.png
Nice setup! Did you take the trade since it reversed and broke below the low of that last hourly candle that was up? I did take it with entry at 0.84184, stop at 0.8458, and limit at 0.8352. I'll move to B/E at the 38.2% retrace at 0.8384.

I just missed this aggressive C buy at the 61.8% in the direction of order flow on the USDJPY 30M Chart. So, I'm not too sure about taking a short at D because of JPY weakness that is obviously across the board. Any thoughts?
Attached Image (click to enlarge)
Click to Enlarge Name: USDJPY ABCD 30M 2_12_13.JPG Size: 68 KB
Chance favors the prepared mind.
  • #2,860
  • Feb 12, 2013 12:41pm Feb 12, 2013 12:41pm
Quoting alij79
Can someone please clear confluence mentioned in Rules of Engagement of ABCD pattern which is as follows:

The market forms the (D) completion point by fulfilling at least a one to one harmonic move of the AB leg coming in at a 127.2% extension of AB. For ratio confluence confirmation a measurement of the BC may be taken and the extension should come in at around a 138.2% to a 161.8%.

I have highlighted the the confluence, can some one explain with example or in simple terms...

Thanks,
Ali
Hey man, take a look at my chart that I just posted. The AB leg's 127.2% extension, the BC leg's 138.2% extension, and the blue line that is the length of AB is the same length projected from C to a possible D. That is all confluence, to my understanding, where those numbers and price projections line up in an area to make it a more significant area of, in this case, Supply/Resistance or in other cases Demand/Support. Funny part is that it also lines up with a big whole number, 95.00 which gives another added benefit to justify a short even though it is against overall order flow.

Anyone else can chime in but that is my understanding. I am fairly new to harmonics but want to add it to my trading plan and work on getting more consistent.
Chance favors the prepared mind.
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