Harmonic price patterns provide high-probability reversal zones by combining Fibonacci retracements and extensions with specific geometric formations. Among the most fundamental harmonic setups are the ABCD pattern and the Three-Drive pattern.
🔺 What is the ABCD Pattern?
The ABCD pattern is the simplest and most beginner-friendly of all harmonic patterns. It consists of three price legs and two key Fibonacci levels.
✅ How to Identify the ABCD Pattern
- AB and CD are called the legs.
- BC is the retracement or correction.
Use the Fibonacci retracement tool to measure:
- BC should retrace to the 0.618 level of leg AB.
- CD should be a 1.272 extension of BC.
📉 Bearish ABCD
Expect a downward reversal after point D.
📈 Bullish ABCD
Expect an upward reversal after point D.
📌 Additional Rules for Confirmation
To validate the pattern:
- The length of AB should equal CD.
- The time duration of AB should match the time of CD.
Once the price reaches point D, traders typically enter a trade in the direction of the reversal.
🌀 The Three-Drive Pattern
The Three-Drive pattern is a more advanced version of the ABCD, containing three impulse legs (called drives) and two retracements.
It closely resembles the structure of Elliott Waves and is highly respected for its reversal signals.
✅ How to Identify the Three-Drive Pattern
Each drive is confirmed by key Fibonacci levels:
- Point A should be a 61.8% retracement of Drive 1.
- Point B should be a 61.8% retracement of Drive 2.
- Drive 2 is usually a 1.272 extension of Correction A.
- Drive 3 is a 1.272 extension of Correction B.
📉 Bearish Three-Drive
Price forms higher highs at each drive, signaling an upcoming bearish reversal.
📈 Bullish Three-Drive
Price forms lower lows at each drive, signaling a potential bullish reversal.
📌 Entry Tips
- Once the price reaches point B, consider setting your order at the 1.272 extension zone to catch the third drive.
- Ensure the time taken to complete Drives 2 and 3 is roughly equal.
- Also, the retracement durations A and B should be similar for stronger confirmation.
💡 Pro Tip
📏 Always wait for the complete pattern to form before entering a trade.
🧠 Patience and precision are key when using harmonic patterns. Combine these setups with other indicators or support/resistance levels for confirmation.
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