What Is A Harmonic Pattern?

Harmonic Patterns are a type of complex harmonic patterns that occur naturally in financial charts based on geometric price action and Fibonacci levels.

These trading patterns were introduced to the trading world by Harold McKinley Gartley in 1932. Harold Gartley created a pattern which he named after himself called the Gartley.

When properly identified, harmonic patterns allow traders to enter the trade in a high probability reversal zone with minimal risk. Harmonic trading techniques utilise Fibonacci price patterns and numbers to quantify these relationships.

They offer a means to establish where the turning points will occur.

What Are Harmonic Patterns?

Harmonic patterns are trend reversal patterns that are based on the Fibonacci extensions, retracement levels, and geometric structures.

These patterns provide traders with a potential reversal zone, which help to enter into reversal trades at the brink of exhaustion.

What Do The Patterns Look Like?

In general, all harmonic patterns are based on 5 turning points in price.

However, each type of harmonic pattern has a different geometrical shape and Fibonacci ratio. We name these points X, A, B, C and D. Each harmonic pattern follows its own set of rules that we discuss in the following article: Different types of patterns.

Why Are They Important?

The most important purpose of harmonic patterns is to predict price movements.

By finding patterns of different magnitudes and lengths and applying Fibonacci coefficients to them, day traders can try to forecast the future movement of financial instruments like stocks, options, and more.

Harmonic patterns are the key to identifying reversals. They are a very precise instrument, characterising very specific price movements.

Trading Harmonic Patterns

Trading Harmonic Patterns is similar to trading any other chart pattern.

Here are some main factors to consider:

• Practice trading these patterns in a demo account before using real money
• Always have a profit and loss target before entering any trade
• Establish the patterns entry and exit points
• Only trade high-quality setups

Conclusion

Every trader wants to become successful. Learning to trade the market using harmonic patterns is not difficult. They can be the most useful patterns if plotted correctly.

Remember that harmonic trading has some inherent pitfalls and it is a rules-based method that requires discipline.

To make harmonic patterns more reliable, make sure to pay attention to support and resistance levels. Combine this with price action reversal patterns such as bullish or bearish engulfing to give yourself extra confidence.

Finally, remember to set stop losses and target levels to reasonable price levels on EVERY trade you take.