What Is An ABCD Pattern?
The ABCD Pattern uses Fibonacci values to determine potential reversal zones in which there is a high chance of a change of market direction. Once identified such patterns can create high reward to risk opportunities when trading forex and indices across multiple time frames.
An ABCD pattern comprises of two impulse legs connected by a retracement giving a lighting bolt or diamond pattern typically conforming to harmonic ratios
The three variants comprise the:
AB=CD which has equally sized A to B and C to D (number of bars between the points)
Classic ABCD in which the B to C legs is a 61.8 or% retracement or 78.6% of A to B
ABCD extension in which the C to D leg confirms to Fibonacci extension levels of A to B
How To Trade ABCD Patterns
When trading in PRT it is important to remember that the ABCD is an indicator of potential reversal zones and that a simple entry at D may not be the best course of action
For the Siren series systems I have added the following rules/filters:
- Price must reverse and cross the price of the close at the D signal within X bars
- Filters for time of day that largely limit new positions to the cash sessions
- Size of patterns
ABCD System Initial Test System Results (Systems are now in Demo)