Part I. Intro to Harmonic Patterns. Commander in Pips: Accept my congratulations! We’ve done a lot of hard work and study to grasp a lot of different tools and approaches to trading. But now we will turn to something special – harmonic patterns. We’ve talked about them lightly already, precisely speaking – only about the simplest one AB-CD pattern, when we’ve discussed Fib extensions. But in the current chapter we will make a lot of clarifications and show the other harmonic patterns. Pipruit: And why are they so “special”? Commander in Pips: Although they are best combined with other tools, but they are most self-sufficient among all the others. In other words – they could be used independently and you may trade purely based on these patterns. But again – their combination with other tools could give better results still. Pipruit: And what’s the general idea of these patterns? Commander in Pips: All these patterns are based on Fibonacci ratios and each pattern is a combination of retracement and extension. That’s why we have to study them after the Fibonacci chapter. Here is what we will talk about: 1. Gartley’s AB=CD pattern; 2. Gartley’s “222” pattern; 3. Gartley’s Butterfly pattern; 4. Crab and Bat patterns; 5. And, finally, the 3-Drive pattern Pipruit: Oh, I still can’t remember all details about triangles and candlesticks, and here again – a lot of different patterns. How I could grasp all this stuff? Commander in Pips: Don’t worry. All of these patterns are based at the same principles, and once you grasp, say, butterfly, there will be no problem to understand Crab and the others as well. So, Butterfly, Crab and Bat are almost the same. For each pattern we will specify the structure and some binding rules that never could be broken, otherwise the pattern will be treated as failed. Then we will specify some advanced moments – how to manage your position if you trade these patterns, and rules that will help you to understand the depth of retracement and target estimations. One of the specific moments for these patterns is that we should not anticipate them for our safety and that it is better enter when you’ll see fully completed pattern. They are mostly reversal patterns. So, let’s get to work… Don’t worry. All of these patterns are based at the same principles, and once you grasp, say, butterfly, there will be no problem to understand Crab and the others as well. So, Butterfly, Crab and Bat are almost the same. P.S. This lesson was written by Sive Morten, who has been working for a large European Bank since April of 2000, and is currently a supervisor of the bank's risk assessment department. Sive's knowledge of forex market and banking industry is vast and quite complete. If you have any specific questions about forex, banking industry, or any other financial instruments, please post them on the next page and Sive should answer soon. Note: FPA ranks are earned in the battles against scam, not in the classroom.