ABCD Harmonic Patterns
Sep 27, 2020
The ABCD Harmonic Patterns indicator automatically identifies and labels classic bullish and bearish AB=CD harmonic price structures to help traders spot potential trend reversals.
Usage
The indicator can be used to identify potential market turning points based on price symmetry. When a pattern is detected, a label is plotted on the chart:
- Bullish AB=CD: Represented by a green arrow and label below the price, suggesting a potential upward reversal.
- Bearish AB=CD: Represented by a red arrow and label above the price, suggesting a potential downward reversal.
The tool also plots pivot highs, pivot lows, and a pivot line to provide context on the underlying price structure used to calculate the harmonic points. Users can observe these levels to see the "legs" of the pattern forming before the final "D" point is confirmed.
Details
The AB=CD pattern is a foundational harmonic structure where the price moves in three legs (AB, BC, and CD). This implementation uses specific Fibonacci-based ratios to validate the symmetry:
- Leg AB to BC: The retracement from B to C must be between 38.2% and 89% of the initial AB move.
- Leg CD: The final move is confirmed when the price distance from C to D meets or exceeds the magnitude of the initial AB move.
The script utilizes pivot logic to determine the A, B, and C coordinates, ensuring that only significant swing points are considered for pattern formation.
Settings
- Length: Determines the lookback period for pivot point detection. A higher value will find larger, more significant patterns, while a lower value will detect smaller, more frequent intraday patterns.
FAQ
How do I use the ABCD Harmonic Patterns indicator?
You can use it to find potential reversal zones where price symmetry completes. Many traders look for additional confirmation, such as oscillators or candle patterns, when the "D" point is reached.
Can I adjust the sensitivity of the patterns?
Yes, by adjusting the "Length" setting. This changes how the script identifies the pivot points that form the legs of the harmonic structure.
How can I access this tool?
You can get access on the LuxAlgo Library for charting platforms like TradingView, MetaTrader (MT4/MT5), and NinjaTrader for free.
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