In this review, we will get acquainted with the ABCD harmonic pattern. We will take a look at how it is formed, and how it can be used in trading. We will tell you what tools you will need to find it on the chart.
ABCD is one of the simplest harmonic patterns. It has only four points (A, B, C, and D) and three price swings (AB, BC, and CD). It looks like a diagonal lightning bolt on the price chart. The last point, D, is formed in the model, which is a potential reversal zone. Its appearance is considered a signal to open buy or sell positions.
The ABCD trading pattern in trading is a three-wave correction, after which the price movement towards the main trend can continue.
The ABCD pattern is relevant for the Forex, stock, commodities, and other financial markets. It gives signals for both buy and sell trading. It is suitable for trading in all market conditions (range, uptrends, and downtrends) and in different time frames.
A harmonic pattern has been formed on the H1 chart of the AUD/USD currency pair. Once the price starts moving up from point D, a buy position can be opened. Stop Loss is set just below point D, and the landmarks for profit-taking are points C, A, and above if there is a strong upward movement.
A bearish ABCD pattern has formed on the H1 chart of the S&P 500 index (US 500). A sell position can be opened after a downward reversal of the prices from point D. Stop Loss is set just above point D, and Take Profit is set at points C, A, and below if the price has a strong downtrend.
Once you understand what the ABCD pattern is in trading, you can learn how to find it on the charts yourself. The easiest way is with the help of special tools – indicators or chart assistants, such as ZUP and Autochartist.
Before using them, you should test them to see how well they find and draw patterns. When using graphical assistants, it is enough to specify the key points of the pattern, and they will draw the rest on their own and show the Fibonacci ratios, which you should use as a reference to find the patterns you are interested in. For example, this tool can be found on TradingView.com.
The ABCD pattern is a fairly simple harmonic pattern based on Fibonacci ratios. Trading on it is relevant for different financial markets. You can find it on the charts on your own, or with the help of special chart assistants and indicators. It should be tested on a demo account before being used in real trading.
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By: Victor GryazinTitle: How to trade the ABCD patternSourced From: blog.roboforex.com/blog/2022/11/25/how-to-trade-the-abcd-pattern/Published Date: Fri, 25 Nov 2022 12:58:31 +0000