Advantages & Disadvantages of Harmonic Patterns
Advantages:
Provide future projections and stops in advance, making them leading indicators
Frequent, repeatable, reliable and produce high probable setups
Trading rules are relatively standardized using Fibonacci ratios
Work well with defined Market Context, Symmetry and Measured Moves rules
Work in all timeframes and in all market instruments
Other indicator theories (CCI, RSI, MACD, DeMark…) can be used along with them
Disadvantages:
Complex and highly technical, making it difficult to understand
Correct identification and automation (coding) of harmonic patterns is difficult
Conflicting Fibonacci retracements/projections can create difficulty in identifying reversal or projection zones
Complexity arises when opposing patterns form from either the same swings or other swings/timeframes
Risk/reward factors from nonsymmetric and lowranked patterns are pretty low
How to Trade Harmonic Patterns and
Pattern Identification
Harmonic patterns can be a bit hard to spot with the naked eye, but, once a trader understands the pattern structure, they can be relatively easily spotted by Fibonacci tools. The primary harmonic patterns are 5point (Gartley, Butterfly, Crab, Bat, Shark and Cypher) patterns. These patterns have embedded 3point (ABC) or 4point (ABCD) patterns. All the price swings between these points are interrelated and have harmonic ratios based on Fibonacci. Patterns are either forming or have completed “M” or “W”shaped structures or combinations of “M” and “W,” in the case of 3drives. Harmonic patterns (5point) have a critical origin (X) followed by an impulse wave (XA) followed by a corrective wave to form the “EYE” at (B) completing AB leg. Then followed by a trend wave (BC) and finally completed by a corrective leg (CD). The critical harmonic ratios between these legs determine whether a pattern is a retracementbased or extensionbased pattern, as well as its name (Gartley, Butterfly, Crab, Bat, Shark, and Cypher). One of the significant points to remember is that all 5point and 4point harmonic patterns have embedded ABC (3Point) patterns.
All 5point harmonic patterns (Gartley, Butterfly, Crab, Bat, Shark, Cypher) have similar principles and structures. Though they differ in terms of their leglength ratios and locations of key nodes (X, A, B, C, D), once you understand one pattern, it will be relatively easy to understand the others. It may help for traders to use an automated pattern recognition software to identify these patterns, rather than using the naked eye to find or force the patterns.
Example: The following chart shows an example of the Bullish Bat pattern with embedded the ABC Bearish pattern. The identification pivots and ratios are marked on the pattern; the pattern also shows the entry, stop and target levels.
Trade Identification
In harmonic pattern setups, a trade is identified when the first 3 legs are completed (in 5point patterns). For example, in Gartley Bullish pattern, the XA, AB and BC legs are completed and it starts to form the CD leg, you would identify a potential trade may be in the works. Using the projections and retracements of the XA and BC legs, along with the Fibonacci ratios, we can build a price cluster to identify a potential Pattern Completion Zone (PCZ) and D point of the pattern.
Pattern Completion Zone (PCZ)
All harmonic patterns have defined Pattern Completion Zones (PCZ). These PCZs, which are also known as price clusters, are formed by the completed swing (legs) confluence of Fibonacci extensions, retracements and price projections. The patterns generally complete their CD leg in the PCZ, then reverse. Trades are anticipated in this zone and entered on price reversal action.
As an example, the Pattern Completion Zone (PCZ) for the Bullish Gartley pattern is constructed using the following Fibonacci extensions and projections:
0.78 XA
1.27 BC
1.62 BC
AB = CD
Market Context Conditions
Most technical traders use chart analysis with market context concepts to trade. Market context concept is described as how current price is reacting to certain levels (pivots, support and resistance, MAs), how indicators are performing relative to historic price conditions (like oversold, overbought) and where/how patterns are developing in the current timeframe or multiple timeframes, etc. Each trader develops his own market context to trade. One of the elegant ways to define market context is through a Fibonacci Grid structure.
]]>Definitions of diversification and asset allocation strategies
Although the assumptions of modern portfolio theory are likely somewhat flawed, asset allocation using MPT is still a proven method to reduce volatility in an investment portfolio. A simple example using separate investors can help explain the value of diversification.
Our first investor, Investor A, has invested his entire portfolio in the shares of only one company. By comparison, Investor B’s portfolio B invested equally in the shares of 30 different companies. Investors risk that the entire stock market will decline and adversely affect their portfolios. However, Investor A also has risks associated with one company that owns its shares. If something specific happens to that company (i.e. profits disappointment, product recall, investor fraud, etc.), Investor A may lose a large portion of his investment. On the other hand, if this same scenario occurs for one of the thirty stocks in Investor B's portfolio, it will not be devastating to the entire portfolio value. In the worstcase scenario, investor A could lose his investment entirely if the company goes out of business. Investor B will only lose 1/30 of its portfolio.
The previous example identifies two different types of risks associated with investing in financial markets. The first type of risk is the risk associated with the entire market or systemic risk. Regular risk affects all stocks in the entire market together, as a whole, and cannot be diversified away within that market. For example, if the entire US economy is weakening, it will affect all stocks within the S&P 500 to some extent. Diversifying your portfolio with other stocks within the S&P 500 will not reduce the overall risk in the portfolio significantly since other stocks share the same equity characteristics.
Another type of risk is the risk that is specifically related to individual security, or irregular risks. Asymmetric risks can be diversified easily, as seen in the previous example of diversification. If one invested equally among the shares of thirty different companies, and one of those companies went completely out of business, the loss in the total portfolio would be only 3.3%.
Asset allocation strategies
Asset allocation to portfolio management can be applied in different ways. Most asset allocation techniques fall into two distinct strategies  strategic asset allocation and tactical asset allocation.
Strategic asset allocation is a more traditional approach to asset allocation that uses the principles and assumptions of modern portfolio theory in a passive investment style. The goal of allocating strategic assets is to create a portfolio that is based on investment objectives and carries risks for the investor. Usually changes in the investment portfolio are made only when the portfolio becomes "unbalanced" due to market fluctuations, or the risk / return profile of the changes the investor requires, requiring an adjustment in the allocation.
Making changes to the portfolio when it becomes "unbalanced" is in line with the "value investing" philosophy that chooses investments because of its perceived lower value against an estimated substantial value. For example, if the allocation of international shares to the portfolio is less than the performance of allocating local shares, over time, the international allocation will form a smaller portion of the total portfolio, given that there are fewer unrealized gains that contribute to total investment in dollars. To reallocate the portfolio and return to the original asset mix ratios, one may need to sell some local shares and buy more international stocks. This is in line with the value investment, because you will buy unfavorable shares (perhaps undervalued) while selling the shares that are in favor (perhaps overvalued).
Tactical asset allocation is similar to strategic asset allocation, with some noteworthy differences. Like strategic asset allocation, the allocation of tactical assets depends on the assumptions of modern portfolio theory. However, unlike strategic asset allocation, it uses a more active investment approach that includes concepts of relative strength, sector rotation, and momentum. Rather than reallocating the portfolio when it becomes unbalanced due to market fluctuations, the allocation deliberately increases its weight in market sectors that outperform the market as a whole.
The strategy of allocating tactical assets differs from investing value in it. Instead of buying shares with poor performance, one buys or adds to positions that outperform the broad market. Therefore, in a tactically dedicated portfolio based on relative strength, one can largely concentrate in specific market segments. The idea behind this type of asset allocation is to remain somewhat diversified, but to focus more portfolio in areas of the economy that are improving. Research studies have shown that when one sector of the economy outperforms the market in general, there is a tendency for this sector to outperform for a long period of time.
The following graph shows the performance of the nine ETFs (representing the nine sectors of the S&P 500) compared to the performance of the S&P 500 over a period of one year. As can be seen from the graph, the three highest performing sectors are consumer goods, healthcare and utilities. The two worst performing sectors are basic materials and energy, where energy is the weakest sector. An investor can use this information by using a tactical asset allocation strategy to choose investments that outperform the broader market and avoid investments that are not performing well in the broader market.
Asset allocation limits
Even with all the benefits it provides, using asset allocation as a risk management strategy has limitations. Realizing these limitations will help investors understand when other tools can be used to reduce risk in their portfolios.
One of the main criticisms of asset allocation is that "black swan" events (unexpected events with catastrophic consequences) appear to occur more in financial markets statistically than if markets really follow the normal distribution. If true, the use of standard deviation as a measure of risk may be misleading, and the statistical correlation between asset classes may be distorted. Also, the correlation tends to increase between asset classes during the crisis period, making asset allocation less useful as a risk management strategy specifically when it is most needed.
Another criticism of asset allocation is that it does not inform the investor when to buy or sell the security. Buying and selling decisions are based on reallocating the portfolio (usually arbitrarily) when it appears that it needs to rebalance due to investor risk parameters, regardless of changing market conditions. Tactical asset allocation strategies can be used to address some of the timing of buying and selling decisions, which are not usually part of strategic investment decisions for asset allocation.
Finally, asset allocation as a risk management tool does not address the risk of portfolio withdrawal. Withdrawal is defined as the minimum value for an individual investment or investment portfolio reached after a previous peak in value. During secular bears' markets, wallet withdrawals can be significant. Simply spreading a person’s investments across multiple asset classes may not provide adequate risk protection.
SIGN UP FOR A FREE TRIAL To Access FREE Forex Signals in the Members Area START FREE 30 DAYS TRIAL on https://www.freeforexsignals.com/
]]>
The best forex trading signals live presented by free forex signals
GBP USD
SELL from 1.2460
Take profit 1.2300
Stop loss 1.2540
type order Market Execution is entering this trade at any price from 1.2460
technical analysis and forex signals for GBP USD
waves in the same direction will tend toward equality SO GBPUSD WILL resume bearish wave to level 1.2130
Riding Wave C in a Zigzag
Trend continues till gives a reversal signal
on hourly chart the Last wave determine the end of the pattern and Consists of zigzag that generate sell GBPUSD forex signals
reversal candlestick pattern on daily chart is shooting star
The price behavior is the result of Environmental pattern
Current surrounding Repetitive pattern is zigzag Wave C = 1.618 Wave A
History Repeats Itself that the future is just a repetition of the past
The bearish movement from level 1.3510 to level 1.1410 appeared before on price chart at 1962015 and followed with bullish movement equal the current bullish movement from level 1.2240 to 1.2520 that give forex trading signals to sell GBP USD and according to this movement GBP USD will decline to 1.0580
Also The bearish movement from level 1.2650 to level 1.2240 appeared before on price chart at 972018 and followed with bullish movement equal the current bullish movement from level 1.1410 to 1.2650 that give forex trading signals to sell GBP USD so the gbp usd will decline near to level 1.1970
surrounding Repetitive pattern before this movement expanded flat Wave C = 1.618 Wave A
We expect price will repeat the same movement again and gbp usd price will go down toward 1.1970
Maybe the correction equal only one wave of previous correction
free forex signals presents special offer
open trading account with one of the best forex brokers and GET FREE forex Signals via SMS, Email and WhatsApp
SIGN UP FOR A FREE TRIAL To Access FREE Forex Signals in the Members Area START FREE 30 DAYS TRIAL on https://www.freeforexsignals.com/
]]>
The Fibonacci Sequence
In Liber Abaci, a problem is posed that gives rise to the sequence of numbers 1, 1, 2, 3, 5, 8, 13, 21, 34, 55, 89, 144, and so on to infinity, known today as the Fibonacci sequence. The problem is this:
How many pairs of rabbits placed in an enclosed area can be produced in a single year from one pair of rabbits if each pair gives birth to a new pair each month starting with the second month?
In arriving at the solution, we find that each pair, including the first pair, needs a month’s time to mature, but once in production, begets a new pair each month. The number of pairs is the same at the beginning of each of the first two months, so the sequence is 1, 1. This first pair finally doubles its number during the second month, so that there are two pairs at the beginning of the third month. Of these, the older pair begets a third pair the following month so that at the beginning of the fourth month, the sequence expands 1, 1, 2, 3. Of these three, the two older pairs reproduce, but not the youngest pair, so the number of rabbit pairs expands to five. The next month, three pairs reproduce so the sequence expands to 1, 1, 2, 3, 5, 8 and so forth. Figure 31 shows the Rabbit Family Tree with the family growing with exponential acceleration. Continue the sequence for a few years and the numbers become astronomical. In 100 months, for instance, we would have to contend with 354,224,848,179,261,915,075 pairs of rabbits. The Fibonacci sequence resulting from the rabbit problem has many interesting properties and reflects an almost constant relationship among its components.
Figure 31
The sum of any two adjacent numbers in the sequence forms the next higher number in the sequence, viz., 1 plus 1 equals 2, 1 plus 2 equals 3, 2 plus 3 equals 5, 3 plus 5 equals 8, and so on to infinity.
The Golden Ratio
After the first several numbers in the sequence, the ratio of any number to the next higher is approximately .618 to 1 and to the next lower number approximately 1.618 to 1. The further along the sequence, the closer the ratio approaches phi (denoted ϕ) which is an irrational number, .618034.... Between alternate numbers in the sequence, the ratio is approximately .382, whose inverse is 2.618. Refer to Figure 32 for a ratio table interlocking all Fibonacci numbers from 1 to 144.
Phi is the only number that when added to 1 yields its inverse: 1 + .618 = 1 ÷ .618. This alliance of the additive and the multiplicative produces the following sequence of equations:
.618^{2} = 1  .618,
.618^{3} = .618  .618^{2},
.618^{4} = .618^{2}  .618^{3},
.618^{5} = .618^{3}  .618^{4}, etc.
or alternatively,
1.618^{2} = 1 + 1.618,
1.618^{3} = 1.618 + 1.618^{2},
1.618^{4} = 1.618^{2} + 1.618^{3},
1.6185^{5} = 1.618^{3} + 1.618^{4}, etc.
Some statements of the interrelated properties of these four main ratios can be listed as follows:
1.618  .618 = 1,
1.618 x .618 = 1,
1  .618 = .382,
.618 x .618 = .382,
2.618  1.618 = 1,
2.618 x .382 = 1,
2.618 x .618 = 1.618,
1.618 x 1.618 = 2.618.
Besides 1 and 2, any Fibonacci number multiplied by four, when added to a selected Fibonacci number, gives another Fibonacci number, so that:
Figure 32
3 x 4 = 12; + 1 = 13,
5 x 4 = 20; + 1 = 21,
8 x 4 = 32; + 2 = 34,
13 x 4 = 52; + 3 = 55,
21 x 4 = 84; + 5 = 89, and so on.
As the new sequence progresses, a third sequence begins in those numbers that are added to the 4x multiple. This relationship is possible because the ratio between second alternate Fibonacci numbers is 4.236, where .236 is both its inverse and its difference from the number 4. Other multiples produce different sequences, all based on Fibonacci multiples.
We offer a partial list of additional phenomena relating to the Fibonacci sequence as follows:
1) No two consecutive Fibonacci numbers have any common factors.
2) If the terms of the Fibonacci sequence are numbered 1, 2, 3, 4, 5, 6, 7, etc., we find that, except for the fourth Fibonacci number (3), each time a prime Fibonacci number (one divisible only by itself and 1) is reached, the sequence number is prime as well. Similarly, except for the fourth Fibonacci number (3), all composite sequence numbers (those divisible by at least two numbers besides themselves and 1) denote composite Fibonacci numbers, as in the table below. The converses of these phenomena are not always true.
Fibonacci: Prime vs. Composite
P 
P 
P 
X 
P 

P 



P 

P 





1 
1 
2 
3 
5 
8 
13 
21 
34 
55 
89 
144 
233 
377 
610 
987 
1 
2 
3 
4 
5 
6 
7 
8 
9 
10 
11 
12 
13 
14 
15 
16 



X 
C 


C 
C 
C 

C 

C 
C 
C 
3) The sum of any ten numbers in the sequence is divisible by 11.
4) The sum of all Fibonacci numbers in the sequence up to any point, plus 1, equals the Fibonacci number two steps ahead of the last one added.
5) The sum of the squares of any consecutive sequence of Fibonacci numbers beginning at the first 1 will always equal the last number of the sequence chosen times the next higher number.
6) The square of a Fibonacci number minus the square of the second number below it in the sequence is always a Fibonacci number.
7) The square of any Fibonacci number is equal to the number before it in the sequence multiplied by the number after it in the sequence plus or minus 1. The plus 1 and minus 1 alternate along the sequence.

8) The square of one Fibonacci number F_{n} plus the square of the next Fibonacci number F_{n+1} equals the Fibonacci number of F_{2n+1}. The formula F_{n}^{2} + F_{n+1}^{2} = F_{2n+1} is applicable to rightangle triangles, for which the sum of the squares of the two shorter sides equals the square of the longest side. At right is an example, using F_{5}, F_{6} and F−−√F_{11}.
9) One formula illustrating a relationship between the two most ubiquitous irrational numbers in mathematics, pi and phi, is as follows:
F_{n} ≈ 100 x π^{2} x ϕ^{(15n)}, where ϕ = .618..., n represents the numerical position of the term in the sequence and F_{n} represents the term itself. In this case, the number "1" is represented only once, so that F_{1} ≈ 1, F_{2} ≈ 2, F_{3} ≈ 3, F_{4} ≈ 5, etc.
For example, let n = 7. Then,
F_{7} ≈ 100 x 3.1416^{2} x .6180339^{(157)}
≈ 986.97 x .6180339^{8}
≈ 986.97 x .02129 ≈ 21.01 ≈ 21
10) One mind stretching phenomenon, which to our knowledge has not previously been mentioned, is that the ratios between Fibonacci numbers yield numbers which very nearly are thousandths of other Fibonacci numbers, the difference being a thousandth of a third Fibonacci number, all in sequence (see ratio table, Figure 32). Thus, in ascending direction, identical Fibonacci numbers are related by 1.00, or .987 plus .013; adjacent Fibonacci numbers are related by 1.618, or 1.597 plus .021; alternate Fibonacci numbers are related by 2.618, or 2.584 plus .034; and so on. In the descending direction, adjacent Fibonacci numbers are related by .618, or .610 plus .008; alternate Fibonacci numbers are related by .382, or .377 plus .005; second alternates are related by .236, or .233 plus .003; third alternates are related by .146, or .144 plus .002; fourth alternates are related by .090, or .089 plus .001; fifth alternates are related by .056, or .055 plus .001; sixth through twelfth alternates are related by ratios which are themselves thousandths of Fibonacci numbers beginning with .034. It is interesting that by this analysis, the ratio then between thirteenth alternate Fibonacci numbers begins the series back at .001, one thousandth of where it began! On all counts, we truly have a creation of "like from like," of "reproduction in an endless series," revealing the properties of "the most binding of all mathematical relations," as its admirers have characterized it.
Finally, we note that (5√5 + 1)/2 = 1.618 and (5√5  1)/2 = .618, where 5√5 = 2.236. 5 is the most important number in the Wave Principle, and its square root is a mathematical key to phi.
1.618 (or .618) is known as the Golden Ratio or Golden Mean. Its proportions are pleasing to the eye and ear. It appears throughout biology, music, art and architecture. William Hoffer, writing for the December 1975 Smithsonian Magazine, said:
...the proportion of .618034 to 1 is the mathematical basis for the shape of playing cards and the Parthenon, sunflowers and snail shells, Greek vases and the spiral galaxies of outer space. The Greeks based much of their art and architecture upon this proportion. They called it "the golden mean."
Fibonacci’s abracadabric rabbits pop up in the most unexpected places. The numbers are unquestionably part of a mystical natural harmony that feels good, looks good and even sounds good. Music, for example, is based on the 8note octave. On the piano this is represented by 8 white keys, 5 black ones — 13 in all. It is no accident that the musical harmony that seems to give the ear its greatest satisfaction is the major sixth. The note E vibrates at a ratio of .62500 to the note C.* A mere .006966 away from the exact golden mean, the proportions of the major sixth set off good vibrations in the cochlea of the inner ear — an organ that just happens to be shaped in a logarithmic spiral.
The continual occurrence of Fibonacci numbers and the golden spiral in nature explains precisely why the proportion of .618034 to 1 is so pleasing in art. Man can see the image of life in art that is based on the golden mean.
Nature uses the Golden Ratio in its most intimate building blocks and in its most advanced patterns, in forms as minuscule as microtubules in the brain and the DNA molecule (see Figure 39) to those as large as planetary distances and periods. It is involved in such diverse phenomena as quasi crystal arrangements, reflections of light beams on glass, the brain and nervous system, musical arrangement, and the structures of plants and animals. Science is rapidly demonstrating that there is indeed a basic proportional principle of nature. By the way, you are holding this book with two of your five appendages, which have three jointed parts, five digits at the end, and three jointed sections to each digit, a 5353 progression that mightily suggests the Wave Principle.
free forex signals presents special offer
open trading account with one of the best forex brokers and GET FREE forex Signals via SMS, Email and WhatsApp
SIGN UP FOR A FREE TRIAL To Access FREE Forex Signals in the Members Area START FREE 30 DAYS TRIAL on https://www.freeforexsignals.com/
]]>
See full review
]]>Please you are here to share your thoughts and experience with with other traders, go ahead and do that.
Notice: angelsfx is a scam forex signal please avoid it. Our review for them is coming soon
]]>