Cypher Harmonic Pattern [TradingFinder] Cypher Pattern Detector

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🔵Introduction

The Cypher Pattern is one of the most accurate and advanced harmonic patterns, introduced by Darren Oglesbee. The Cypher pattern, utilizing Fibonacci ratios and geometric price analysis, helps traders identify price reversal points with high precision. This pattern consists of five key points (X, A, B, C, and D), each playing an important role in determining entry and exit points in the financial markets.

The reversal point typically occurs in the XD region, with the Fibonacci ratio ranging between 0.768 and 0.886. This zone is referred to as the Potential Reversal Zone (PRZ), where traders anticipate price changes to occur.

The Cypher harmonic pattern is popular among professional traders due to its high accuracy in identifying market trends and reversal points. The pattern appears in two forms: bullish Cypher pattern and bearish Cypher pattern.

In the bullish Cypher pattern, after a price correction, the price moves upward, while in the bearish Cypher pattern, the price moves downward after a temporary increase. These patterns help traders use technical analysis to identify strong reversal points in the PRZ and execute more optimal trades.


Bullish Cypher Pattern:



Bearish Cypher Pattern:




🔵How to Use


The Cypher pattern is one of the most complex and precise harmonic patterns, leveraging Fibonacci ratios to help traders identify price reversals. This pattern is comprised of five key points, each playing a critical role in determining entry and exit points.

The Cypher pattern appears in two main types:

• Bullish Cypher pattern: This pattern appears as an M shape on the chart and indicates a trend reversal to the upside after a price correction. Traders can prepare for buying after identifying this pattern in technical analysis.
  
  
• Bearish Cypher pattern: This pattern appears as a W shape and signals the start of a downtrend after a temporary price increase. Traders can use this pattern to enter short positions.
  

🟣How to Identify the Cypher Pattern on a Chart

Identifying the Cypher pattern requires precision and the use of advanced technical analysis tools. The pattern consists of four main legs, each identified using Fibonacci ratios and geometric analysis.

To spot the Cypher pattern on a chart, first, identify the five key points: X, A, B, C, and D.

2. XA leg: The initial move from point X to A.
   
3. AB leg: The first correction after the XA move, where the price moves to point B.
   
4. BC leg: After the correction, the price moves upwards to point C.
   
5. CD leg: The final price move that reaches point D, where a price reversal is expected.
   

In a bullish Cypher pattern, point D indicates the start of a new uptrend, while in a bearish Cypher pattern, point D signals the beginning of a downtrend. Correctly identifying these points helps traders determine the best time to enter a trade.


🟣How to Trade Using the Cypher Pattern

Once the Cypher pattern is identified on the chart, traders can use it to set entry and exit points. Point D is the key point for trade entry. In the bullish Cypher pattern, the trader can enter a long position after point D forms, while in the bearish Cypher pattern, point D serves as the ideal point for entering a short position.


🟣Entering a Buy Trade with the Bullish Cypher Pattern

In a bullish Cypher pattern, traders wait for the price to reach point D, after which they can enter a buy position. At this point, the price is expected to start rising.


🟣Entering a Sell Trade with the Bearish Cypher Pattern

In a bearish Cypher pattern, the trader enters a sell position at point D, expecting the price to move downward after reaching this point. For additional confirmation, traders can use technical indicators such as RSI or MACD.


🟣Risk Management in Cypher Pattern Trades

Risk management is one of the most critical aspects of any trade, and this holds true for trading the Cypher pattern. Traders should always use stop-loss orders to prevent larger losses in case the pattern fails.

• In the bullish Cypher pattern, the stop-loss is usually placed slightly below point D to exit the trade if the price continues to drop.
  
  
• In the bearish Cypher pattern, the stop-loss is placed above point D to limit losses if the price rises unexpectedly.
  

🟣Combining the Cypher Pattern with Other Technical Tools

The Cypher pattern is a powerful tool in technical analysis, but combining it with other methods such as price action and technical indicators can improve trading accuracy.

🟣Combining with Price Action

Traders can use price action to confirm the Cypher pattern. Candlestick patterns like reversal candlesticks can provide additional confirmation for price reversals at point D.

🟣Using Technical Indicators

Incorporating technical indicators such as RSI and MACD can also help traders receive stronger signals for entering trades based on the Cypher pattern. These indicators help identify overbought or oversold conditions, allowing traders to make more informed decisions.


🟣Advantages and Disadvantages of the Cypher Pattern in Technical Analysis

Advantages:

• High accuracy: The Cypher pattern, using Fibonacci ratios and geometric analysis, provides high precision in identifying reversal points.
  
• Applicable in various markets: This pattern can be used in a wide range of financial markets, including forex, stocks, and cryptocurrencies.
  

Disadvantages:

• Rarity: The Cypher pattern appears less frequently on charts compared to other harmonic patterns.
  
• Complexity: Accurately identifying this pattern requires significant experience, which may be challenging for novice traders.
  

🔵Setting


🟣Logical Setting

ZigZag Pivot Period: You can adjust the period so that the harmonic patterns are adjusted according to the pivot period you want. This factor is the most important parameter in pattern recognition.

Show Valid Format: If this parameter is on "On" mode, only patterns will be displayed that they have exact format and no noise can be seen in them. If "Off" is, the patterns displayed that maybe are noisy and do not exactly correspond to the original pattern.





Show Formation Last Pivot Confirm: if Turned on, you can see this ability of patterns when their last pivot is formed. If this feature is off, it will see the patterns as soon as they are formed. The advantage of this option being clear is less formation of fielded patterns, and it is accompanied by the latest pattern seeing and a sharp reduction in reward to risk.

Period of Formation Last Pivot: Using this parameter you can determine that the last pivot is based on Pivot period.





🟣Genaral Setting


Show: Enter "On" to display the template and "Off" to not display the template.
Color: Enter the desired color to draw the pattern in this parameter.
LineWidth: You can enter the number 1 or numbers higher than one to adjust the thickness of the drawing lines. This number must be an integer and increases with increasing thickness.
LabelSize: You can adjust the size of the labels by using the "size.auto", "size.tiny", "size.smal", "size.normal", "size.large" or "size.huge" entries.



🟣Alert Setting

Alert: On / Off

Message Frequency: This string parameter defines the announcement frequency. Choices include: "All" (activates the alert every time the function is called), "Once Per Bar" (activates the alert only on the first call within the bar), and "Once Per Bar Close" (the alert is activated only by a call at the last script execution of the real-time bar upon closing). The default setting is "Once per Bar".

Show Alert Time by Time Zone: The date, hour, and minute you receive in alert messages can be based on any time zone you choose. For example, if you want New York time, you should enter "UTC-4". This input is set to the time zone "UTC" by default.


🔵Conclusion

The Cypher harmonic pattern is one of the most powerful and accurate patterns used in technical analysis. Its high precision in identifying price reversal points, particularly within the Potential Reversal Zone (PRZ), has made it a popular tool among professional traders. The PRZ, located between the Fibonacci ratios of 0.768 and 0.886 in the XD region, offers traders a clear indication of where price reversals are likely to occur.

However, to use this pattern successfully, traders must employ proper risk management and combine it with supplementary tools like technical indicators and price action. By understanding how to utilize the PRZ, traders can enhance the accuracy of their trade entries and exits.

Ultimately, the Cypher pattern, when used in conjunction with the PRZ, helps traders make more precise decisions in the financial markets, leading to more successful and well-informed trades.