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Harmonic Currency Pair Cross Index

  #15 (permalink)

Edmonton, Canada
 
 
Posts: 187 since Apr 2011
Thanks: 12 given, 162 received

And, here is another with very powerful synergy and it comes directly on the heels of the last combination of patterns. In fact, the termination of the last Crab/Falcon sequence of patterns, resulted in the revelation of two more Bullish patterns. So, previously, you were trading the market Short with two Bearish patterns and now, in a dime, you get two additional Bullish patterns.

The pattern in blue appears on the surface to be a Standard Harmonic Pattern to the naked eye, while the other (in white) is noted as the fixed TCD Falcon Pattern. Remember that Standard Harmonic patterns are dynamic and emerge relative to Time, but TCD Falcon patterns are static (fixed) relative to Time. As you look even closer, you see that something is not quite right with the Standard Harmonic Pattern.

In the pic below, you see convergence in the two patterns to an almost perfect match. The TCD Falcon Intersection between the Long TCD and the Short TCD, cross very near the Standard Harmonic Pattern's "B" point. That's very strong pattern synergy and that's a good thing.

However, there is divergence or disagreement in the Timing of the Entry between the two patterns. Remember, you enter on a Standard Harmonic at point "D" and you enter on a TCD Falcon at the start of the next bar depending on which Timing Delimiter you used to locate the pattern. Note the addition of another blue vertical line. I put that on the chart to show the start of the next hour, which was 2200 hrs GMT on 19 June 11, because if you recall, the week ended on Friday in the charts posted above. So, for the TCD Falcon Pattern, the next available entry would be after the move was over at 2200 hrs GMT on 19 June 11, where the second vertical blue bar is located. Well, that seems to present a problem.

In addition, for the strict Standard Harmonic Pattern Trader, there is another apparent problem here. The legs don't match either the Gartley, Butterfly, Crab or the Bat, if you follow Scott Carney's theoretical set-ups.

So, while it might look "Standard," it is really not and here is why.

For the Bat, point "B" has to be less than .618 of the XA leg. If you follow the strict Gartley theories, then point "B" is perfect at .618 of the XA leg, but point "D" has to be .786 of the XA leg. If you switch back to Scott Carney, and attempt to turn it into a Crab, the once again, point "D" is wrong because it would need to be 1.618 of the XA leg. And, if you attempt to switch over to Bryce Gilmore, and turn it into a Butterfly, then point "B" is perfect at .618 of the XA leg, but point "D" is wrong again as it needs to extend all the way to between 1.27 to 1.618 of the XA leg.

So, what does the Harmonic Trader do at this point? This is where having a good understanding of one of the most powerful principles in trading comes in handy. Once again, Magnitude can save the day in this situation. But, how?

Take a look at this chart:
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The first thing that jumps out at my eye, even without my indicators, is the Magnitude of the downward move in price in the last hour, outlined by the last vertical yellow line and the last vertical blue line. The Time between both of those lines is precisely 1 Hour. Why? Because I'm using that Time Delimiter to for my TCD Falcon Pattern. Recall, that I can use any Time Delimiter I want, but once I pick one, the TCD Falcon Pattern is fixed within that specific time-frame. So, I'm using an M1 chart, but I'm looking for 1 Hour Falcons and as many Standard Harmonics as I can find at the same time.

Now, not the downward move in the hour leading up to the what should be the Falcon Long entry level at the start of the next hourly bar. Now, look at point "D" of what appears to be the Standard Harmonic Pattern. At point "D" the market already launches Long and remains Long right up to the Close of Friday, which is the Entry point for the Long Falcon. So, the move for the Falcon, is already over and I missed it, right? Not really. Here's why.

If I understand a currency pair's Magnitude (the high probability for going up or down in any time-frame) and I know how to properly measure it, then I can have a very good idea about whether or not that downward move is over. When I compare both the Magnitude for the pair and the 127.0 extension of the "D" point for what appears to be the Standard Harmonic Pattern, I can increase my confidence that the downward move is over for that particular time-frame. It is very important to remember that ALL Magnitude definitions are time-frame specific. It is about the historical and empirical evidence for Magnitude within a specific time-frame and for a specific currency pair.

So, observing these two things, I can feel confident in placing my entry at or near the 127.0 extension of point "D," knowing that for any Conforming TCD Falcon Pattern with its wings pointed upwards, my entry will always be Long and that for any Standard Bullish Harmonic Pattern, my entry will also be Long. What confirms this? The rock solid bottom spike laid on the market specifically at 127.0 of the XA leg, which is Point "D" of the Standard Harmonic.

So, even though the Standard Harmonic turned out not be perfectly aligned with all the ratios that you hear people talking about in various places, I have another weapon in the Conforming TCD Falcon Pattern, and hourly Magnitude, to help me make a wise entry decision. The move up was roughly 36.5 pips in height, so there was plenty enough room to make such a trade while risking no more than 10 pips or so - something above the 161.8 extension level.

So, here is an example of where you have something that is Harmonic-like (depending on who you read and which version of the truth about ratios you follow) being backed-up by a completely different kind of pattern altogether, that just happened to once again, coincide with the Standard Harmonic(like) Pattern.

I think this is a good example of the kind of synergy that I was talking about earlier. On that same exact chart, in the last hour delimited by the last vertical yellow and blue lines, another Standard Harmonic Pattern emerges (a Bearish Bat) with its point "D" landing just minutes before the close of that same day (Friday). That Bat had an MFE of 41.4 pips (Short) before the next TCD Short Trajectory that extended into 22 June 11, terminating at its Low of $1.42653. So, these patterns are all around us in FX. They are literally all over the place. Find the right one's and learn how to use them to your trading advantage.

There is another strategy that I'm currently developing for trading Standard Harmonics, that is not in the public domain as far as I know (I have not seen anyone talking about it) and any Newbie, if they really began to study Harmonic Patterns, could discover some really interesting ways to create their own hybrid way of using Harmonics on their own. But, it will take some creative outside the boxing thinking.

I hope this helps a bit, feelnot.

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