Origins of harmonic trading, Crab and Bat patterns

In the master class "Be a Trader with iLearney"

Despite the fact that the address technical analysis While new arrows of criticism are constantly flying, traders continue to use it. Most of them are thoughtless, especially without paying attention to how his methods work. The main thing is that they bring positive financial results! However, there are those who try to understand the nature of financial markets with the help of existing tools.

History of the emergence of harmonic trading

As a result, there are theories of "smart money", based on the study of the behavior of institutional investors with a large amount of information; concepts of fractal analysis, prioritizing the predetermination of market processes existing independently of people's desires and many others.

One of such directions of technical analysis, trying to explain the logic of quotes movement is harmonious trade. We have talked about her instruments before on the pages of the magazine, now we would like to continue the conversation.

The first mention of patterns using Fibonacci ratios to identify important reversal levels dates back to the 1920s, when Mr. Gartley presented his model to the entire trading community. Even at that time there were heated debates about its independence and novelty. Critics claimed that the described graphical configuration was an element of wave analysis. After many decades, such an idea is still present.

However, unlike the wave theory harmonious trade is a more objective and, in a sense, simpler direction of technical analysis. We are left to marvel once again at how effectively its methods work.

The Crab pattern of harmonic trading

Thus, on the daily chart of the main currency pair euro/dollar it is clearly visible that the formed in February-March of the current year Crab pattern (Crab) with correction at point 2 at 50-61%, was fully realized in July, when the market turned around as if by magic.

And how can one not believe in the magic of harmonious trade, if the existence of interrelationships between retracements (components of the model) was revealed many years ago?

The presented figure clearly shows that if there is a corrective movement to the area of 38.2-61.8% by Fibonacci from the value of wave XA, the target of the downward movement of wave CD will be the level of 161,8%. This pattern is decades old, faded on the folds, but still works!

Harmonic Trading Bat Pattern

Moreover, familiarization with the tools of harmonious trading allows a trader to be constantly "in the market". If we return to the eur/usd chart, it is not difficult to note that following the the Crab patternmarked in blue, has begun to form. bat model (Bat, in red).  Correction in the area of 50% sets the target reference point of the upward movement at 88.6%.

A feature of harmonious trade is the possibility of transforming many patterns into the Crab pattern, which has a wider range of corrective movement.

In this regard, if the market can overcome the resistance at 88.6%, the target of the upward movement will be $1.31 per unit of the single European currency. If the bears are able to defend this level, we are waiting for the quotes to return to the downtrend.

It should be noted that harmonious trade is multifaceted and is used in modern trading in a slightly different way than it was described by the classics of research. We will talk about it later. Now I would like to hear your opinion about the relationship between the described patterns and wave analysis tools, and also to talk about whether everything is really predetermined on the market? And what can it be connected with? What is the reason of its harmony?