Harmonic Pattern Indicator … The forex market is a huge market that can potentially change your fortune if you trade wisely. There are so many trading tools you can add to your arsenal to optimize your skills and understanding, one of which is the Harmonic Pattern Indicator. This tool comes handy for both short and long-term traders. It is also useful whether you are a newbie or you have been trading forex for decades.
The Harmonic Pattern indicator is highly optimized for the popular MT4 platform. As you may already know, you can’t rely on the human intellect to determine when to enter or exit a trade position. But with this tool, you’re sure of trading successfully and making lots of profits.
We know you’re already interested in this fantastic tool; as such, in this article, we will walk you through what it is, how it works, and conclude with how to use the indicator. So sit back and enjoy the review of this technical indicator.
What Is the Harmonic Pattern Indicator?
The harmonic pattern indicator is a forex trading indicator that’s optimized for MT4. It is widely known as a multi-timeframe indicator, which means it can be used irrespective of the timeframe. Whether you want to trade from one minute to one month without interference, this lovely indicator has got you covered. The harmonic pattern indicator is highly valuable for any trader.
For instance, if you are a scalper, and you want to identify trends, say between one minute and 6 minutes, the harmonic pattern indicator comes handy. Similarly, a day trader looking to identify trading opportunities between one hour and one-day timeframes will also find this tool useful. In the same vein, a long-term trader will use this indicator to analyze his/her chances of making a profit in the long run.
How does the Harmonic Pattern Indicator Work?
Whether you are a newbie or experienced trader, it is vital to understand how an indicator works before using it. Just like other indicators, the harmonic pattern indicator is designed to analyze the market for potential trading opportunities regardless of the currency pair. It uses historical data to indicate the prevailing market conditions. Once you are aware of market conditions, it becomes easy for you to make money from the forex market.
From the chart above, you can see that the harmonic pattern indicator displays two conjoined triangles. The triangle’s vertices are labeled X, A, B, C, and D. The two triangles share vertex B. While the first triangle has vertex X and A, the second triangle has vertex C and D.
If you look at the right corner of the chart, you will see a text explaining how and where to place your order, take profit, and stop-loss levels. To achieve a take profit, you need to place an order through D1, D2, or D3.
To see the price which the vertex is predicated upon, you need to move your cursor to the vertices.
In the chart above, the price level (which is 1.12558) is the number below the “DreamCC_Batterfly9” line.
Looking at the triangles more closely, you will discover that one of the triangles is formed based on the available historical data, and the other is used to indicate the prevailing trading patterns. Traders can use this indicator to determine future expectations.
By showing past and present patterns, the indicator shows the past and present market wave pattern where X is the commencement of the wave. The original wave commences at X, then moves to A and finishes at B. The subsequent wave then begins at B, proceeds to C, and is forecasted to terminate at D. The other vertices assist in indicating the waves, the present market trend is shown by the direction of vertex D from C. the vertices show the turning points. They indicate the market prices at which a pattern ends, and another trend begins.
Depending on the market pattern, D could either be down or up from C. If D is down from C, the harmonic pattern indicator shows that there’s a high possibility of a downtrend. Similarly, if D is up from C, the indicator indicates that there is a high possibility of an uptrend.
In some cases, the trend between B and C may still be active and need to be completed before the start of the market trend between C and D.
From the chart above, the market trend between B and C is now complete, while that of vertex C and D is still running. It is important to mention at this point that it is not a must for the bars to be located within the triangles. The most important thing to consider using this indicator is for the market prices to align with the prices on the vertices.
How to use the Harmonic Pattern Indicator
Though a technical indicator, the harmonic pattern indicator is not as complicated as most traders think. New traders without technical knowledge can make use of it to determine the price point. Now you know how the tool works, so how do you use it to place and close orders?
Essentially, you need to start by optimizing the indicator for it to appear the way you want it. You can do that by adjusting the inputs. If you are a beginner, we suggest you use the default as it is. The default setting is meant for beginners! Let’s start with opening a position.
How to Open a Long Position
The right time to open a position is when vertex D appears on the upper side of C. If even the price points don’t align with the prices of vertex C, do not be tempted to open a position. At best, you need to allow some more time for the price points to hit the level of vertex C.
But if you are a long-term trader, you can use the information at the right-hand corner of the chart to place a buy, set stop loss and take profit levels.
How to Open a Short Position
The most favorable time to open a short position is when vertex D is on the lower side of C. Again, do not be tempted to open a short trade if the prices have not aligned with the price level of vertex C. If you do, you would lose money. At best, you can allow some time for the prices to hit vertex C’s price level.
Final Thoughts Harmonic Pattern Indicator
There you have it! The harmonic pattern indicator is an essential resource if you want to trade successfully on the market. As a beginner, you can start with a demo account to learn the indicator before going live.
And if you don’t want to stop there then there is plenty more that you can look upto to try. Check it out from this link and heighten your capability to accomplish your dream of becoming a highly profitable and successful Forex Trader.