Abcd Pattern Trading

risk of losing

The thing that works them is that they use the confluence method, meaning that they expect reactions from clusters of certain levels defined by Fibonacci retracements. After the drawing, find point D and enter a trading position opposite the CD line. But to be on the safe side, first, analyze the crypto’s price action and the prevailing market conditions and conduct other fundamental analyzes before taking a position. Step 1 – Use the built-in ABCD pattern drawing tool to find ABCD patterns in crypto. Ensure that the Fibonacci ratios properly fit the harmonic trading pattern. You must follow the pattern to find BC if the leg is on AB.


In short, they are looking for an opportunity to buy in a market that is falling and looking for a short sell opportunity in a market that is rising. The ABCD pattern helps give traders a framework for where to risk and enter their trades. This prevents chasing a stock and getting shaken out in the midday pullback.

Once you are done with all the checks, go to the preferred trading platform, and start trading. It is obvious to feel anxious when you invest your hard-earned money in the trading market where making a profit is uncertain. But if this fear interferes with your decision-making… Moving Average Convergence Divergence – Provides trade signals and helps illustrate the trend’s direction and momentum.

Periods of low volumes and consolidating ranges are not ideal for the ABCD. This pattern functions best in trending market conditions. When trading the ABCD pattern, always conform to the Fibonacci levels. There are various indicators to assist you in confirming the patter requirements. The ABCD pattern is one of the most basic patterns to learn.

What is the ABCD pattern?

The more confirmation you have for your trade, the better. It looks just like a hammer with a mallet on top and a handle beneath. When you spot this pattern toward the end of a downtrend, or an uptrend, it can often signal that the trend is ending. When played correctly, you can take an entry after the candle closes and put your stop below the hammer handle. In these circumstances, an investor will wait too long or jump too soon, thereby missing out on the top-end of the stock’s profit-making capabilities.


It is best to place stop-loss points just above or below point D, depending on the direction of the trade. If the move goes beyond that point, the chart pattern is invalidated and the reversal is less likely to happen. Take-profit points are placed by using the Fibonacci levels. For instance, traders might look for a move back to the original point A and move a trailing stop-loss to 28.2, 50, and 61.8 percent Fibonacci levels along the way.

By knowing these levels, you can exit your trade before the market turns against you. Novak may not be the first person to observe that trading an ABC pattern could be profitable. Others have discussed this type of trading strategy in the literature.

Kisah Penemu Pola ABCD, Harold McKinley Gartley

It’s one thing to know when to trade, but it’s just as important to know when not to trade. Check off all the boxes of your trading checklist before trading a stock. The ABCD pattern is simple … but it can be difficult to master.

A second advantage that the pattern offers is a trade entry with clearly defined and limited risk. Running an initial stop-loss order just on the opposite side of point D gives traders the chance to take a low risk trade. The ABCD pattern is sometimes traded as a continuation pattern of an existing trend. For example, if the pattern forms during a prevailing uptrend, a trader may look to buy around point C, with an eye to taking profits around point D. The goal is to enter a profitable trade during a pullback when the price is still close to point C. Like with the bullish pattern, you should be able to predict where D may end up.


A good example would be Bollinger Bands, it’s an overlay that shows the high and low limits of a price. When all three components merge at points on the chart, it creates a pattern. The pattern illustrates the electric move of the stock so that traders can predict the price trajectory. Many traders refer to it as a “lightning bolt” on a chart. The first thing to note is that the pattern is created by human beings who are constantly buying and selling in the market. This means that there is a lot of emotion involved in the creation of the pattern.

ABCD Pullback Strategy

To make the signal clearer, trend and counter-trend trades were labeled on the chart . The chart above shows the bullish ABCD pattern being easily identified with the zig-zag indicator. After point D is formed, price makes a small rally right after this pivot swing low if formed. As we can see from the above, the ABCD pattern is a simple harmonic pattern that appears on the price charts frequently.

  • When several ways converge on top of the bearish ABCD pattern, it’s generally a good indication that the stock will follow a particular course.
  • It’s also ideal if it’s in a hot sector, has a low float, and has news to boot.
  • Frankly, perhaps the most challenging part of using the ABCD trading pattern is to draw it on a price chart.
  • For instance, traders might look for a move back to the original point A and move a trailing stop-loss to 28.2, 50, and 61.8 percent Fibonacci levels along the way.
  • C is a small spike back toward point A, but it ends up consolidating instead of rushing back to the breakout level.

Tradable Leg– For the bullish version of the ABCD, a bear trend bar can be the first tradable leg of a pullback. Eventually, there will be more sellers than buyers, and the pattern will go downwards to point C as the price decreases. Then, the cycle repeats itself with more people buying the stock, which moves the line up again towards point D. This is where you’ll see people buying the stock, which increases the price.

Then, the pattern will end at D being the lowest low point where a trader is expected to buy. In the bullish ABCD Pattern, as shown above, point A will be the starting point of the price movement, which is usually a high swing. Then point B represents the intraday low while point C represents an upward price correction. Finally, the swing arrives at point D, the lower point than B, indicating a buying point. The ABCD bearish version has three ascending price swings before a trend reversal occurs. At first, the pattern begins with a price increase from A to B.

The ABCD pattern may be utilized to determine an upbeat or downbeat reversal pattern that is based on the orientation. It is especially essential as it comes into view regularly in the market graphs. If there is, then your analysis is more likely to be correct. Highest probability trade entry is at completion of the pattern . A leading indicator that helps determine where & when to enter and exit a trade. As a result of the constant growth in the crypto industry with the first emergence of Bitcoin and Ethereum, traders…

It is a harmonic pattern that helps traders predict when the price of a stock is about to change direction. The lines AB and CD are called “legs”, while the line BC is referred to as a correction or a retracement. Patterns are the distinctive formations created by the movements of security prices on a chart and are the foundation of technical analysis. and the persons involved do not take any responsibility for your actions or investments. This will help you take profits off the table when the market moves in your favor. For example, you can use a trailing stop loss to lock in profits as the market moves in your favor. Another thing that you need to consider is the market conditions. You should only enter your trade when the market conditions are favorable.

Leave a Reply