Chapter 17, Part II. Harmonic Numbers and AB=CD pattern. Page 10

Commander in Pips: May be, but you do not know it in advance. We have to take profits when available, and do not worry what the market does after it has reached your profit objective. Whistle on the road to the bank and don’t care about market moves after your trade has been completed with profit. But this does not mean that you should take profit prior to where your trading plan suggests to do that – do not break your initial trading plan. But be calm when it has been accomplished.

Here is example of similar possibility but with AB=CD “sell” pattern:

Chart #6 | EUR/USD 15-min
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The market has accomplished this pattern almost pips to pips.

Pipruit: And why do we use just a 20 pips stop loss here?​

Commander in Pips: Generally because we solidly reduce trading time frame to 15-min chart. Hence, it allows us reduce harmonic swing value for 2 times. Still experience in trading of harmonic patterns is very important as always. In the beginning you can work only with larger values of harmonic swing, just separate AB=CD’s that could give you nice profit compared to potential stop-loss. Later you will better understand when it makes sense to reduce harmonic swing or not. It also depends from the size of AB=CD. On chart #6, by the way, we could apply even 40 pips stop loss, and it will give us nice risk/reward ratio>1. Also after some practice you will better choose targets – probably sometimes you will hold onto your position much longer; sometimes you will fix profits at 0.5 or even 0.382 levels.



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 themon the next page and Sive should answer soon.


Note: FPA ranks are earned in the battles against scam, not in the classroom.