Harmonic patterns are mostly traded as the reversal patterns. Very few traders also trade them as an aggressive setup for emerging Harmonic patterns. The point is once the legs XA, AB, BC are identified as per the different pattern rules and the underlying is in the final leg of CD, one can trade it in the original direction of CD before the price hits the PRZ. But how?
Very simple – once the point C is confirmed, draw a horizontal line on B. Once the price reaches E & crosses it, one can confirm the pattern to be an emerging Harmonic pattern and trade the ED leg in the direction of CD only. After reaching D, one can exit and treat the pattern as completed Harmonic pattern. Now, this can be traded as reversal patterns!
As Harmonic patterns occur rarely, this trade setup increases the trading opportunities. Also, one becomes more watchful while initializing the trades for a reversal, once the pattern is completed!!
Though the reward is small as only the ED leg is traded in emerging patterns, my win ratio has been around 70%! Also, it has helped my entries in taking reversal trades once the price reaches PRZ! Though I have been updating here with the completed Harmonic patterns for reversal trades, I restrained myself in posting these emerging patterns. Now, since I have tried it myself and trading it successfully, I will try to update these kinds of trades on RT basis if possible.
Please feel free to comment on fine tuning the entries or any other way to trade the emerging Harmonic patterns! In fact, I would love to know who else trades emerging patterns.
Note: I trade Harmonic patterns on 4 hour and above time frame!
Now it’s your turn…..
Feel free to share your experience and thoughts in the comments area.
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