Harmonic Patterns Cheat Sheet: A Trader’s Guide

Harmonic trading patterns are technical analysis tools that help traders identify turning points and reversal opportunities in the financial markets. By learning how to spot Harmonic Patterns on price charts, traders can improve their timing on entries and exits. Follow my Harmonic Patterns Cheat Sheet below!

This comprehensive harmonic patterns cheat sheet covers the most popular harmonic patterns, how they are identified, and how to effectively trade them. You can just read on to enhance your technical analysis skills.

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What are Harmonic Patterns?

Harmonic patterns are based on Fibonacci numbers and ratios. The Fibonacci sequence is a series of numbers where each number is the sum of the preceding two numbers (1, 1, 2, 3, 5, 8, 13, 21, 34…). These numbers create ratios like 0.618, 1.618, 2.618 etc. that are prevalent throughout nature and financial markets.

Harmonic patterns use Fibonacci ratios to identify turning points in price action. The patterns are formed through a sequence of structures that foreshadow a reversal. By learning to recognize these chart formations, traders can take advantage of turning points.

Let’s take a look at some of the most common harmonic patterns:

Gartley Pattern

Identification:

• X to A leg: Retracement of 0.618 of prior up/down move
• A to B leg: Retracement of 0.618 of X to A leg
• B to C leg: Equal to A to B projection
• C to D leg: Equal to 0.786 of X to A leg
• D completes pattern at 0.618 of X to C leg

How to Trade:

• Entry at D completion
• Stop loss 2-3 pips above point D
• Take profit at 1.27 or 1.618 extension of X to D leg

Notes:

• Most accurate if found on larger time frames (4H, Daily, Weekly)
• Lookback period minimum 30 bars recommended
• AB=CD is ideal ratio but not required

Example:

Gartley Pattern Example

Butterfly Pattern

Identification:

• X to A leg: Retracement of 0.786 of prior up/down move
• A to B leg: Retracement of 0.382 to 0.618 of X to A leg
• B to C leg: Equal to A to B projection
• C to D leg: Equal to 1.27 or 1.618 of X to A leg
• D completes pattern at 0.786 of X to C leg

How to Trade:

• Entry at D completion
• Stop loss 3-5 pips above D point
• Take profit at 1.27 or 1.618 extension of X to D leg

Notes:

• Accuracy increases if found on larger timeframes
• CD leg should not exceed AB leg
• Ideal ratios: AB=CD, BC=0.382 to 0.618 of AB

Example:

Butterfly Pattern Example

Bat Pattern

Identification:

• X to A leg: Retracement of 0.382 to 0.50 of prior up/down move
• A to B leg: Retracement of 0.382 to 0.886 of X to A leg
• B to C leg: Equal to A to B projection
• C to D leg: Equal to 0.886 of X to A leg
• D completes pattern at 0.886 of X to C leg

How to Trade:

• Entry at D completion
• Stop loss 3-5 pips above D point
• Take profit at 1.27 or 1.618 extension of X to D leg

Notes:

• Most accurate on shorter timeframes
• BC projection is less important
• CD leg should not exceed AB leg

Example:

Bat Pattern Example

Crab Pattern

Identification:

• X to A leg: Retracement of 0.382 to 0.618 of prior up/down move
• A to B leg: Retracement of 0.382 to 0.618 of X to A leg
• B to C leg: Equal to A to B projection
• C to D leg: Equal to 0.618 to 0.786 of X to A leg
• D completes pattern at 0.618 of X to C leg

How to Trade:

• Entry at D completion
• Stop loss 2-3 pips above D point
• Take profit at 1.27 or 1.618 extension of X to D leg

Notes:

• Most accurate on shorter timeframes
• CD leg should not exceed AB leg
• Ideal ratios: AB=CD, BC=0.382 to 0.618 of AB

Example:

Crab Pattern Example

Shark Pattern

Identification:

• X to A leg: Retracement of 0.382 to 0.618 of prior up/down move
• A to B leg: Retracement of 0.382 to 0.5 of X to A leg
• B to C leg: Equal to A to B projection
• C to D leg: Equal to 1.13 to 1.618 of X to A leg
• D completes pattern at 0.886 of X to C leg

How to Trade:

• Entry at D completion
• Stop loss 3-5 pips above entry
• Take profit at 1.13 or 1.618 extension of X to D leg

Notes:

• Most accurate on 4 hour and daily timeframes
• CD leg should not exceed AB leg
• Ideal ratios: AB=CD, BC=0.382 to 0.5 of AB

Shark Pattern example

Wolf Pattern

Identification:

• X to A leg: Retracement of 0.382 to 0.618 of prior up/down move
• A to B leg: Retracement of 0.382 to 0.5 of X to A leg
• B to C leg: Equal to A to B projection
• C to D leg: Equal to 1.27 to 1.618 of X to A leg
• D completes pattern at 0.786 of X to C leg

How to Trade:

• Entry at D completion
• Stop loss 2-3 pips above D
• Take profit at 1.27 or 1.618 extension of X to D leg

Notes:

• Look for pattern on H4 and Daily timeframes
• BC projection less important
• CD leg should not exceed AB leg

Example:

Wolf Pattern Example:

Advanced Harmonic Trading Strategies

Now that we’ve covered identification of the main harmonic patterns, let’s discuss some trading strategies to use them effectively:

Confirmation

Wait for a break and close above or below the potential reversal point to confirm the pattern before entering. This avoids false breaks.

Trend Filter

Trade harmonic patterns only in the direction of the prevailing trend. This improves probability of continuation versus reversal.

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Cluster Trading

Look for clusters of multiple harmonic patterns completing around the same price zone for confluence.

Fibonacci Extensions

Use Fibonacci extensions for profit targets rather than fixed take profit pips. Extensions provide logical areas for price to reverse again.

Risk Management

Use tight stop losses of 2-5 pips to define risk. Move to breakeven once price moves in your favor. Manage risk on every trade.

Harmonic Patterns Cheat Sheet Scaling In

Consider scaling in to increase position size as the pattern completes and price confirms the reversal. This can boost gains.

In summary, harmonic trading takes practice but can significantly improve chart analysis skills. Use the patterns in this cheat sheet in conjunction with confirmation, trends, and risk management for optimal trading.

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