Thursday, March 30, 2017

The ABCD Trading Pattern

August 4, 2014 by  
Filed under Trading Tools

The ABCD pattern is one of the classic chart patterns which is repeated over and over again. It starts out with an AB leg, then retraces to C to a Fibonacci level of 0.382, 0.500, 0.618, 0.764, 0.86, then it continues to a Fibonacci exension level D – mostly 1.27 or 1.618. As a rule, the deper the retracement, the shallower the D extension will be.

Why is the ABCD Pattern important? It helps identify trading opportunities in any market (forex, stocks, futures, etc.), on any timeframe (intraday, swing, position), and in any market condition (bullish, bearish, or range-bound markets).

Highest probability trade entry is at point C, deep retracement.

Each turning point (A, B, C, and D) represents a significant high or significant low on a price chart. These points define three consecutive price swings and major support or resistance levels. The trend is intact as long as point A is not violated. The moment price violates point A, the likelyhood of a trend reversal significantly increases.

Each pattern leg is typically within a range of 3-13 bars/candles on any given timeframe.

Trading the ABCD pattern

You trade the ABCD with Fibonacci trading.

 

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