FXLORDS Increase Your Profits
The more tools a trader is familiar with and confident using, the more successful they will be at Forex trading. But one of the hardest things to establish as a trader is the Entry Point regardless if it was a Long (buy) or a Short (sell) Position. To beginners sometime hitting the point correctly is a matter of luck or as if its up to the market decide it.
Trading patterns make finding such a point much easier and among tools a trader can apply easily, one of the most useful is the ABCD Trading Pattern.
The ABCD Pattern is formed according to the laws of Fibonacci and relies heavily on the ratio between later numbers in the sequence, especially the 61.8%.
This pattern is easily recognized as ‘lightning bolt’ and have three consecutive and distinctive price swings. According to its position, it can be either Bullish or Bearish. Each of these two has three different patterns. They are:
1- AB = CD; where AB and CD are the same length.
2- The Classic ABCD; where CD is 127.2% or 161.8% of BC length.
3- The ABCD Extension; where CD is 127.2% or 161.8% of AB length
So what do we understand from these patterns?
The turning points of a price are labelled A, B, C and D and each represent a significant high or low. Between them the points give us consecutive price swings which form the legs of the pattern; AB, BC and CD.
To confirm that what you’re looking at is a bearish ABCD pattern you need to make sure that point A is a significant low and B is a significant high. Between the two swing points there should be no breakouts and point C must be above point A.
If you’re looking at a bullish ABCD then A will be a significant high whilst B should be a significant low. Once more, there can be no breakouts between A and B and this time C must be below point A.
If you’re going to trade based on the ABCD patterns, you should confirm your decision by looking at other indicators. If they converge, you’ll have a greater chance of making a potentially good trade into a great one!
