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An overview of the ABCD pattern - how to apply the algorithm in Forex
Harold Hartley has left us a legacy of interesting and useful method of forecasting market prices, known today under the name "harmonic analysis". In a previous article I examined the ZUP, which automatically searches for patterns of the same name and shows them on the chart, but it would not be possible if not for the figure ABCD.
In fact, the ABCD pattern is not even a link of all elements of harmonic analysis and its foundations, without which no well-known figure would not have appeared. I say this to the fact that some people disparagingly call this pattern the "simple" and ignore, relying on the testing of more complex models.
As you can already guess from the title, this formation consists of four extremes, so in terms of geometry it is similar to a normal broken line (zigzag).
From the point of view of graphic analysis on Forex ABCD is a perfect "flag", as such models often (but not in 100% of cases) are formed after a strong pulse and provide a signal to open an order in the direction of the previous trend.
ABCD pattern on the Forex chart
The construction of the ABCD Forex
Given the mirror the similarities between the bullish and bearish patterns, I will describe the search algorithm and the layout of the pattern on the example of the up-figure.
One of the first things to start building, so it is with search start point (A) of reference. Usually it is a local extremum, in which buyers put a point after a strong and continuous trend:
Extremes on the chart
Then you must wait for the rollback prices reached a maximum and the formation of a local minimum (B):
The formation of a local minimum in the figure
In the third phase of constructing the pattern ABCD is stretched the Fibonacci grid from A to B, with a given line, you can highlight on the chart that the model is better seen:
The Fibonacci grid for the pattern ABCD
Butterfly Gartley is one of the most famous patterns Harold Gartley.
These levels will need to search for the point C, because "ideally" it should be located at the 61.8% or 78.6 per cent. In our example, the price rolled back to the 61.8% (small error is permissible because it is the market) - excellent, denoted by a new vertex in the graph:
C on the chart in forming the pattern
Next, tie another Fibo grid from B to C, and pay attention – there are no experiments can not be carried out, so that all constructions are made strictly from left to right, i.e. in the direction of the price movement:
ABCD Forex markup
In principle, the draft ABCD for Forex ready, as the point D must be located at the level of the 161.8 has just marked grid, so the algorithm of further actions will depend on the type of orders which a trader applies, in particular, allowed:
placing a pending order buy limit on the level of the 161.8;
transactions in the market at the moment when the price bounces from the bar.
Trying to predict the price movement
In the first case, a speculator saves time but exposes the position to the additional risk because the price can "whistle" down without stopping, crashing through a pattern ABCD.
If you use the second strategy, the probability of losses is greatly reduced, since it becomes possible to apply additional filters, ranging from ending indicators and candlestick analysis. For example, you can buy the pair only after it formed a false breakout.
As for the original purpose when trading on ABCD, then set the take profit it is recommended from the point D to the distance AB.
Indicator for marking ABCD Forex
Reviewed ZUP is all good – it builds several models Gartley and Pesavento, indicates the purpose of the motion and even recommends levels to set stop losses, but he has one drawback – the main figure of the it does not emit as a separate pattern.
To solve this problem was created by the PZ ABCD Retracement, which after installation on the chart looking for all formations, similar to the pattern, and marks them on the workspace.
Trading signals for the PZ ABCD Retracement
No need any additional libraries and files, so the trader just copy file PZ-ABCD-Retracement.ex4 in indicator folder of the terminal and restart the platform.
It is not difficult to guess the pattern ABCD in this case is marked with a ZigZag, so the first set of indicator settings designed to optimize the parameters of this algorithm.
This is followed by configuring the external lines, among which you can choose different ways to display bullish and bearish patterns, but careful attention should be paid to the block of functions called "Customize Ratios":
Settings PZ-ABCD-Retracement
With their help, the trader can specify the valid values on a scale Fibonacci, considering which, the ABCD indicator will build on the Forex chart. By the way, here it is not necessary to use the classic Fibo level, because when you build a layout some acceptable deviation (above I have already mentioned this).
In addition, PZ ABCD Retracement indicates with arrows the signals to open orders and contains the unit settings, which can include sound and text messages about new patterns.
As a conclusion for today's topic I would like to note one fact – it is considered the development is really good, at least the code works correctly. However, we should not forget that the only indicator assists and performs routine work, but to weed out false figures the trader himself, otherwise it would have long appeared profitable EA on the Gartley patterns.
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| Category: Forex | Added by: (30.10.2017)
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| Views: 375
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