Abcd Trading Strategy

Home   /   Forex Trading   /   Abcd Trading Strategy

Abcd Trading Strategy

Home   /   Forex Trading   /   Abcd Trading Strategy

risk management

Next, the line CD should be the 1.272 Fibonacci extension of BC. To spot this chart pattern, all you need are ultra-sharp hawk eyes and the handy-dandy Fibonacci chart tool. Learn how to trade forex in a fun and easy-to-understand format. Yes, ABCD is considered as the simplest form of harmonic pattern.

harmonic chart pattern

  • Not only did ABCs and extremes have to be programed, but a trend confirmation signal had to be integrated.
  • How To Trade The Gartley PatternThe Gartley pattern helps identify price breakouts and signals where the currency pairs are headed.
  • This is a slightly advanced technique, but it should be easy once you’re used to spotting ABCD chart patterns.
  • Each category has a number of patterns that are common for traders to use.

The stock then rallied to $3,680, which formed the D leg. The move to the $3,640s formed the A leg of the ABCD pattern. It’s when a stock spikes big, pulls back, then grinds ups and breaks out to a new high of the day. The material provided is for information purposes only and should not be considered as investment advice. Confusing the ABCD with other harmonic patterns, like the Gartley or three-drive pattern.

Finding the ABCD pattern

It’s important to remember that you shouldn’t use the ABCD trading pattern in isolation when speculating on future price movements. Your positions should be supported by extensive technical analysis and fundamental analysis. Bull flag trading patterns are one of many patterns that traders study in the markets. Trading patterns are a way to simplify the markets and condense information into repeatable, visual formations….

The trading process is the same as discussed above but you may ask what if the price didn’t reverse after selling all shares? To avoid this kind of situation you can use the trailing stop loss strategy after point . At this point, we are going to explain a more simplified version of the ABCD pattern that actually works in the market. Your results may differ materially from those expressed or utilized by Warrior Trading due to a number of factors. We do not track the typical results of our past or current customers.

bc leg

On the other hand, the bearish ABCD pattern is the opposite way of the bullish version. Next, the price falls but does not reach the A level . The first leg starts from the bottom of a downtrend and then rises but does not reach or exceed the beginning of the downtrend . In a downturn, the bullish pattern appears and predicts a possible reversal. The distance between A and B and C and D must be equal, and the line BC must show a 61.8 percent to 78.6 percent retracement of AB. In addition, the CD should indicate a 127.2 percent to 161.8 percent extension.

Study the features of the Cup and Handle pattern

Wasn’t until more recently around 2015 that XABCD Patterns caught the attention of many due to the ability to use both time and price when constructing patterns. This was the first introduction into using time and price with patterns. Active traders would be well advised to commit this phrase to memory. Whilst chart patterns certainly provide traders with a statistical advantage, they in no way guarantee a successful trade.

It’s also the basis for a lot of other long patterns like the VWAP-hold, high-of-day break and the OTSwizzle. ECN, STP, Crypto, Micro, PAMM accounts, dependent on jurisdiction. Practice identifying the ABCD pattern with the TickTrader terminal and the built-in ABCD drawing tool. should always remember to effectively manage their risk with stop-loss orders and proper capital allocation. Intense selling pressure leads to a sharp decrease in the security price , after which the price rises back up as more and more people begin to buy the dip . After this rise, selling volume will again increase, sending the security price back down to a support level lower than ; we can call this support level .


Let’s examine some possible entry and exit points using the ABCD pattern. takes no responsibility for loss incurred as a result of the content provided inside our Trading Room. By signing up as a member you acknowledge that we are not providing financial advice and that you are making the decision on the trades you place in the markets. We have no knowledge of the level of money you are trading with or the level of risk you are taking with each trade. Then, after drawing the ABCD pattern, you need to look for point D, where you enter a position in the opposite direction of the CD line.

How To Use the Rate of Change (ROC) Indicator in Trading

This pattern that helps traders predict when the price of a stock is about to change direction. The pattern can be used to predict either a bullish or bearish reversal depending on the orientation. The ABCD Pattern can be used on your trading platform charts to help filter potential trading signals as part of an overall trading strategy. It also requires a strong risk management strategy, as well as the ability to adapt to changing market conditions. The ABCD works well on multiple time frames or in concert with other technical indicators.

As with the bullish ABCD pattern, the bearish pattern begins with a sharp move to the upside. The pattern is essentially the opposite of the bullish pattern, rising where the bull pattern falls and falling where the bull pattern rises. At , the uptrend should reverse and begin to turn into a downtrend. Once you have located an entry position, you should begin to consider when to exit the trade.

Find out which account type suits your trading style and create account in under 5 minutes. A cautious trader, on the other hand, can take positions after point D. Connecting highs and lows establishes the pattern between points A, B, C, and D. Forex trading is challenging and can present adverse conditions, but it also offers traders access to a large, liquid market with opportunities for gains. Bitcoin , Ethereum , Litecoin , Bitcoin Cash and Ripple are leading cryptocurrency products. If you are looking to trade forex online, you will need an account with a forex broker.

retracement of ab

Like every other Gartley pattern, the ABCD pattern’s structure is dependent on formation. When the line AB equals the line CD, the pattern emerges. Legs are defined as lines AB and CD, while correction or retracement is defined as line BC. Periods of low trading volumes and consolidating ranges are not ideal for the ABCD.

Margin trading involves a high level of risk and is not suitable for all investors. Forex and CFDs are highly leveraged products, which means both gains and losses are magnified. You should only trade in these products if you fully understand the risks involved and can afford to incur losses that will not adversely affect your lifestyle. Bearish ABCD patternTo take positions, traders wait for the pattern to complete, then go long or short at point D.

Head And Shoulders Pattern

Please be advised that your continued use of the Site, Services, Content, or In provided shall indicate your consent and agreement to our Terms and Conditions. Not only are they the connection between trends, but they are also at the origin of all major price moves. IG International Limited is licensed to conduct investment business and digital asset business by the Bermuda Monetary Authority.

But despite a trending direction, it can be difficult to establish support levels in these stocks. The risks of loss from investing in CFDs can be substantial and the value of your investments may fluctuate. 75% of retail client accounts lose money when trading CFDs, with this investment provider. You should consider whether you understand how this product works, and whether you can afford to take the high risk of losing your money. One of the best ways to read an abcd pattern, or any pattern in trading, is to pay close attention to the volume signature that accompanies the pattern.

by Orchdent