You probably want to know what you should do to trade harmonic price patterns if you should happen to come across some of these in the course of your trading.

There are three quick steps that you should know so that you can spot a harmonic price pattern for yourself and potentially act on it accordingly.

  1. Locate a potential harmonic price pattern
  2. Measure the pattern
  3. Buy or sell at the conclusion of the pattern

 

There is a good chance that you can profit just by following those three steps when looking for patterns in the charts.

 
1 | Locate the Potential Pattern

Mark up your chart carefully when you think you see a potential harmonic price pattern. You will want to do so because you need to identify those times in the market when you believe it is most likely that you have spotted such a pattern.

There is no guarantee that what you think you are seeing is what you are actually seeing until the market starts to move. Thus, you will want to double-check everything by marking it up and checking it again later.

2 | Measure the Potential Pattern

You will use your Fibonacci tool to measure the potential pattern that you believe that you are seeing at this time.

You should probably give this a try so you can see if the pattern that you believe you are seeing is truly strong enough to have the potential to run in the way that you would like for it to.

See below at our previous ABCD pattern, and you’ll find a few observations upon using the Fibonacci tool:

  • Line BC is a 0.618 retracement of move AB.
  • Line CD is a 1.272 extension of move BC.
  • The length of line AB is almost equal to the length of line CD.

Is it time to buy???

3 | Buy or Sell Depending on These Measurements

Once you feel confident that you have measured a true harmonic pattern, then you will want to place your trade to either buy or sell the pattern based on what you have calculated.

It is possible that your measurements are exactly right and you can capitalize on the trade that you have identified. If so, take advantage of this and celebrate your win!

Take a look at our example: