Harmonic Pattern Forex Strategy

The Harmonic Pattern Forex strategy is based on a popular Harmonic trading pattern that works in both bullish and bearish currency markets.

We’ll take advantage of bullish and bearish butterfly harmonic trading patterns as our means for placing logical buy/sell market orders.

Once we find these trading patterns on our activity chart, the next step is to apply some technical indicators as confirmation tools in predicting future price action.

Chart Setup

MetaTrader 4 Indicators: Harmonic.ex4 (Default Setting), Gioteen-Norm.ex4 (Default Setting), MACD.ex4 (Default Setting)

Preferred Time Frame(s): 1-Minute, 5-Minute, 15-Minute, 30-Minute, 1-Hour, 4-Hour, 1-Day, 1-Week, 1-Month

Recommended Trading Sessions: Any

Currency Pairs: Any pair

Download

Download the Harmonic Pattern Forex Strategy

Buy Trade Example: EUR/CHF (EURO / Swiss Franc), M15 Chart

Fig. 1.0

Strategy

Long Entry Rules

Initiate a buy entry if the following indicator or chart pattern gets put on display:

  • If the bullish butterfly harmonic pattern pops up on the chart screen as seen on Fig. 1.0, price is likely to bounce off Point 5/D to trigger a bullish entry. Since the market is not a perfect place, we can also expect price to bounce off along CD (that’s between Point 4 and Point 5).
  • If a bullish reversal pattern is established between Point 4 & Point 5, then we can further confirm the strength of the bullish sentiment if the red line of the Gioteen-Norm custom indicator breaks above the 0.00 horizontal level. This adds more weight to the bullish butterfly harmonic pattern.
  • If the silver histograms of the MACD indicator stay above the zero horizontal line following a bullish reversal trigger around Point D, it is further signaling a buy trend.

Stop Loss for Buy Entry: Place stop loss below the low of the bullish butterfly harmonic pattern.

Exit Strategy/Take Profit for Buy Entry

Exit or take profit if the following rules or conditions takes precedence:

  • If the red line of the Gioteen-Norm custom indicator dips below the zero reference level while a bullish trend is ongoing, it is pointing to diminishing bulls power, as such an exit or take profit is duly recommended.
  • If the MACD Metatrader 4 indicator pops up a silver histogram below the zero horizontal level while a bullish trend is running, bulls power is said to be weaning i.e. an exit or take profit stance is advised.

Sell Entry Rules

Enter a sell order if the following holds true:

  • If the bearish butterfly harmonic pattern pops up on the chart screen as illustrated on Fig. 1.1, price is likely to bounce off Point 5/D to trigger a bearish entry. Considering that we do not have an ideal market, we can also expect price to bounce off along CD (that’s between Point 4 and Point 5) on its way up.
  • If a bearish reversal pattern is established between Point 4 & Point 5, then we can further confirm the bearish sentiment if the red line of the Gioteen-Norm custom indicator dips below the 0.00 horizontal level. It is adding more weight to the bearish butterfly harmonic pattern.
  • If the silver histograms of the MACD indicator align below the zero horizontal line when price reveals some bearish reversal around Point D, it is pointing to a sell signal.

Stop Loss for Sell Entry: Place stop loss above the high of the bearish butterfly harmonic pattern..

Exit Strategy/Take Profit for Sell Entry

Exit or take profit if the following takes center stage:

  • If the red line of the Gioteen-Norm custom indicator surges above the zero reference level while a bearish trend is on course, bears are said to be closing their positions increasingly, as such an exit or take profit stance will suffice.
  • If the MACD forex indicator aligns a silver histogram above the zero horizontal level during a bearish trend, bears power is said to be diminishing, therefore a trigger to exit or take profit at once.

Sell Trade Example: EUR/CHF (EURO / Swiss Franc), H1 Chart

Fig. 1.1

Free Download

Download the Harmonic Pattern Forex Strategy

About The Forex Technical Indicators Used

The Harmonic indicator is a technical tool that plots complex harmonic price patterns on the activity chart.

The indicator utilizes geometry and math to define precise turning points.

The Gioteen-Norm custom indicator can be used to spot divergence in the market as well as emerging trends.

A buy signal occurs when its signal line hovers above the 0.00 signal level and a sell signal when it does the opposite.

The Moving average convergence divergence (MACD) is a trend-following momentum indicator that reveals the connection between two moving averages of price.

Easy Installation

Start using this forex strategy in just 5 minutes. Click here to get started now.

Share Now!