Technical Analysis Harmonic Pattern

In the previous post you have learned about the Elliott Wave extension. There you notice some patterns. Now I am discussing some different types of pattern and these are very useful. Since you are learning Forex for professional level and I am trying to you as many topics and tips on Forex thus you can make yourself Forex professional.
Do you see bats, crab, butterfly? Yes of course but why? Is it important? Yeah this is important. Sound like noise ...um.. bat, butterfly...
Let's turn on the Harmonic patterns.

*You must be use Fibonacci retracement level and extension for measuring these patterns.

*ABCD pattern: It is likely wave and AB length = CD length, AB length time need = CD length time
An AC length retracement is 0.61 and BD length is 1.27 Fibonacci.

*3 Drive pattern: A and B point retracement is 0.61, point 2 and 3 is 1.27
Drive 2 complete time = drive 3 complete time

 

*Gartley pattern: It is discovered by H.M.Gartley.It is inside ABCD pattern and based on W or M shape or structure overall.There are some rules for it:

*Move AB is 0.61 retracement of XA move.

*Move BC is either 0.38 or 0.88 level retracement of AB

*Move CD must be 0.78 level retracement of XA 

*Crab pattern: In 2000 Scott Carney discover this pattern.His observations are

*Move AB is either 0.38 or 0.61 level of XA move.

*Move BC is either 0.38 or 0.88 level of AB move.

*Move CD may be 1.61 extension level of XA move

*Bat pattern: In 2001 Scott Carney discover another patter.It is bat pattern.His own observations are

*Move AB is 0.38 or 0.50 level of move XA.

*Move BC is either 0.38 or 0.88 of move AB.

*Move CD may 0.38 of move XA.

*Butterfly pattern:It is discover by Bryce Gilmore.His own observations are

*Move AB may be 0.78 level retracement of move XA.

*Move BC is either 0.38 or 0.88 of move AB.

*Move CD may be 1.27 or 1.61 level of move XA.

Technical Analysis Elliot Wave Extension Pattern

In my previous post I mentioned that it is not so easy to identifying Elliott Wave perfectly. And the more time you will be find only 1-3 waves or 1-5 waves but not with the full extension pattern because it is rare and 1-3 or 1-5 waves the nature of the market with trader sentiment overall. However some time it found full Elliott Wave and you have to learned this perfectly to be a professional trader. Huh.. Is it? Yeah Elliott Wave now most widely used theory among the professional traders.
Now turn on about Elliott Wave extension wave which is called an ABC pattern and more than 21 types of ABC structure recognizes.

*Always use the Zig Zag indicator to easily identify these patterns.

*ABC Pattern:

*Flat Pattern:

*Zig Zag Pattern:

Technical Analysis Elliott Wave theory

Ralph Nelson Elliott (1871 to 1948)  was an accounting professor who was a mad genius for researching 75 years stock data and discover "Wave" in the market, with having evidence published "The wave principal " in 1938.He believed that a trading market happens in repetitive cycles and he points these cycles for only market traders' emotion or psychology or reaction influences. He discovered some swing point of price and structure a pattern like a wave. Do you learn Dow theory?  Elliott Wave theory is based on Dow theory. He described Fractal (same pattern appearing at every degree of trade ) is the nature of the market.

There were 273 rules and guidelines for Elliott Wave principle. So if you want to know details please read a reference book for wave theory. Elliot believed that market move as cycles or wave and this he called 5-3 wave patterns. First 5 wave patterns are called impulse wave while second 3 wave pattern is corrective patterns. Corrective patterns are called ABC or ABC pattern means one kind of patterns they are. Moreover 21 types of corrective patterns now identify. So the Elliott Wave principle is not so easy as you think. You have to  learn more and more about it. However I hereby show only simple matter of Elliott Wave. Simply learn the following:

*Wave 1 is just sudden a simple wave.
*Wave 2 never goes back to wave 1 completely.
*Wave 3 always bigger than wave 1.
*Wave 4 never same price level of wave 1
*Wave 1,3,5 is always extended waves.

Corrective patterns:
As I wrote above corrective patterns are different types. The majors corrective patters are
*Zig Zag pattern
*Flat pattern
*Triangles pattern

Remember the following facts:

*Wave in wave means when you identify wave 1,2 etc.. Then there may be see a tiny wave into these waves.
*Use Fibonacci retracement in order to forecast future price movement or next wave mean 50% to 78% retracement you should be notice for wave 2 and 4.
*A lot of practice you need to identify correct Elliott Wave.
*Wave 2 & 4 are always short waves.

Technical Analysis with divergence

Do you see what action price does during up trend and down trend? If you see then you may catch point as Higher high and Lower low price. But how you guess it? The answer is divergence. It tells you where those your marking points. And you can analysis price action better for the help of divergence. But careful it needs some tolerant practice, because many times false divergence happened and as a novice trader you may guess it exact divergence. You must be using for guessing true divergence by MACD. When the market is higher high MACD shows to you Lower High and Lower low it shows Higher low. There are two types of divergence,

*Regular Divergence
*Hidden Divergence

Remember the following facts:

*If market moving uptrend then you will find Higher low to Higher high.
*If market moving down trend then you will find Lower high to Lower Low.
*you must be search the last level double top or double bottom patterns.
*Divergence tells you if price moving continue direction or opposite direction.
*Hidden divergence is difficult to recognize for newbie.

Technical Analysis Dow Theory

Today in the Forex you can notice that many indicators which are mostly uses currency business understanding or technical analysis is collected from the stock market and refined.So we have to go back a little understanding today's Forex market theoretical or concept.How many  ideas or concepts that reflect today's Forex market along with the stock market? Well one of the concept is Dow Theory.Charles Dow was born in 1851 and he was not learned yet likely modern graduate.But he was a genius for his brilliant observation with stock chart.In 1882, he founded Dow Jones & company and he created Dow Jones Industrial Average,20 Stock Rail road Average(Now Transport Average).Dow himself never refers his theory as Dow theory.Actually Dow did some editorials and later W.Hamilton, R.Rhea and S.A.Nelson, E. George Schaefer,Richard Russell refined the Dow theory as they did research and published their own observation.

Dow emphasis the stock market movement into 3 paths. A certain time period each movement defined, and these movements may be a major or minor trend. Dow called them as Major movements, Secondary movements and Intra -day-cycle. These movements familiar now as Bull markets, Bear markets, Ranging markets.

W. Hamilton focus on the main points as:

*The price average discount everything.
*The 1st or primary trend cannot be manipulated.
*Both 2 types of Dow's creator (Industrial & Rail) must confirm each other.
*Trending spotting Higher high & Lower low. 

E. George Schaefer points some new view of Dow's as:

*He believer both Hamilton and Rhea were far from the Dow reputation for "Values".
*He believed that R. Rhea just some took advantage from Hamilton research and tried to improve the Hamilton system.
*He prove that some points of Dow theory cannot play today's modern emotion stock market such as secondary trend retrace 1/3 to 2/3 of the primary swing.
*He use 50% retracement concept.
*The yield cycle.
*200 SMA use
*The ratio of the short interest to the daily volume.

I hereby write few lines of Dow's as it is important to learn the "Wave" concept in the Forex market which is now familiar as Elliot Wave and it is based on the Dow theory.

Introduction to Chart Patterns

Now you probably familiar with candlesticks and market a little more from time to beginning Forex learning. With stick the candlesticks chart you may be see that some structure are formed in the candlestick charting. And these structures you will find easily once you have known about clearly. So lets us journey to learn these types of chart formation. Are you ready?

*Double Top & Bottom: You may know the candlestick formation called double top & bottom. Now gather some candlestick you also see the double top and double bottom formation.

*Head & shoulders / Inverse Head & shoulders: Like to see about a human head and shoulder.









*Rectangles: Like a box shape price consolidation into the box and rectangle line break.

*Triangles: Just look systematic triangles, ascending or descending triangles.

*Wedges: Wedges are consolidation price into support and resistance line and ending a parallax line. Then price break trade line and market moving bullish or bearish trade.

*Pennants: These formations during after a big up or down price movement. It is like almost the same as triangle formation but little difference you may be notified.

Bullish / Bearish Flag Pattern:Like a flag shape candlesticks gathering or consolidation or ranging and break upper / lower trade line.

How to trade chart patterns:  You should always wait for the formation of chart and identify these and must trade some far from these line breakout levels because it may mislead you unless you do not do that. And a lot of practice you need to do that. These patterns are easy to see and most of the traders look these along with you. So make sure that you enter trades a secure distance.