Harmonic patterns
Price patterns defined by Fibonacci ratios, from the ABCD to the Gartley and the butterfly.
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Lessons
- 01The ABCD pattern.The ABCD pattern is a four-point price shape with two moves in the same direction, AB and CD, split by a pullback, BC. In the classic form, BC retraces 61.8% to 78.6% of AB, and CD matches AB in length. Point D marks a zone where some traders expect a reversal, though the evidence for it is weak.
- 02The three-drives pattern.The three-drives pattern is three pushes in the same direction, each separated by a pullback, with the drives and pullbacks close in size. After a rise it shows three higher highs and hints at a turn down; after a fall, three lower lows hint at a turn up. It signals possible exhaustion, never a guaranteed reversal.
- 03The Gartley pattern.The Gartley pattern is a five-point price shape, X, A, B, C and D, measured with Fibonacci ratios. B retraces 61.8% of the first leg, XA, and the pattern completes at D, near a 78.6% retracement of XA. Traders watch D for a possible reversal, but the rules vary and evidence for the pattern is weak.
- 04Crab and butterfly patterns.Crab and butterfly patterns are harmonic patterns whose final point, D, lands beyond the starting point X. In a butterfly, D sits at about 1.27 times the XA leg from A. In a crab it sits at about 1.618. Traders watch D as a possible turning zone, but the ratios are conventions with limited evidence.