How to Trade Harmonic Patterns The Right Way
I decided to mark this post as an educational to show the community what I believe is the best way to trade harmonic patterns. Many traders just open a chart and usings their fib tool scan for any pattern to complete and when they identify one they trade it ignoring the most important thing into a chart - market structure. Instead if you filter the patterns you trade, trading the ones which complete at key support and resistance levels you will definately see your success ratio increasing dramatically. I personally use median line analysis to define the levels where I will watch for a pattern completion. Using the same method I define my profit targets aiming the next potential (support and resistance) level where price may end its move. Aiming for the 0.382 or 0.618 is quite myopic as my times the potential a pattern is giving us is much much better.
In this NGAS chart, price has broken below a key level and in case it retraces to test the broken median line, it will give us the completion of a bearish bat pattern. Aiming for the lower quartile and the sliding parallel below it, we would get involved into trade with realistic targets which offer tremendous risk/reward ratio.
Let me know commenting below, your prefered way of trading harmonic patterns.
I hope you found this post useful,
John
In this NGAS chart, price has broken below a key level and in case it retraces to test the broken median line, it will give us the completion of a bearish bat pattern. Aiming for the lower quartile and the sliding parallel below it, we would get involved into trade with realistic targets which offer tremendous risk/reward ratio.
Let me know commenting below, your prefered way of trading harmonic patterns.
I hope you found this post useful,
John
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