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Chapter 17, Part IV. 3-Drive pattern and harmony in classical patterns. Page 3

Discussion in 'Complete Trading Education- Forex Military School' started by Sive Morten, Dec 21, 2013.

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  1. Sive Morten

    Sive Morten Special Consultant to the FPA

    Aug 28, 2009
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    Invalidating points of 3-Drives pattern

    1. Drive 1 above/below drive 2 for sell/buy pattern, so as drive 2 above/below drive 3;

    2. C-point below/above A-point for Sell/Buy 3-Drives pattern;

    3. If pattern shows extensions greater than 1.618, then it treated as a failed one;

    4. If market shows gaps or long-ranged bars while is forming 3-Drive pattern in the direction of it, especially closer to third drive completion point, then probably this pattern will fail. At least you need to wait for additional confirmation of this pattern after it will be completed.

    That’s being said, 3-Drives pattern as with any other should have three degree of symmetry – price symmetry in AB-CD and drives expansions, time - in duration of AB and CD legs, and visual – it should be pleasure to an eye to look at it.
    Pipruit: Ok, it does not look too difficult, especially after all other stuff that we’ve studied.​
    Commander in Pips: Excellent! So, we can pass to trading process then. I have something special for you…
    Pipruit: Please give me relief…​
    Commander in Pips: Don’t worry, it will be interesting. We will start from followed chart:

    Chart #1 | 60-min EUR/USD 3-Drives “Sell” pattern

    Tell me, what you see, based on our description that we’ve just discussed.
    Pipruit: Well, I see that the pattern holds according our rules, in terms of price action and time. C point stands above A, so everything in order. Also this is an example when 1.618 from first drive coincides with 1.27 of second. This makes this pattern stronger. Also, we see that this is reversal pattern – as you’ve said, right after it completed market shows a strong thrusting move in the opposite direction.​
    Commander in Pips: Very well, son. Concerning trading this pattern, we should act as with other harmonic patterns. Try to describe how we should act in current environment.
    Pipruit: Ok, I’ll try. First, we should decide where to place stop. As we’ve said, if market will exceed 1.618 target of the pattern, very probable, that this pattern will fail. Hence, our first area to place stop is above 1.618 of second drive. Since this is 60-min chart, I suppose we can use this way.

    Second possibility, is if our account rather small, we can use harmonic swing on hourly chart about 37 pips, but in our case it gives us the same level as using 1.618 expansion of second drive.

    Third possibility is to use some patterns that could appear around completing point of this 3-Drives. This could be used if we trade at large time-frame, say, on weekly, or if our account very small. Here, fortunately we have bearish engulfing right at point of completion of 3-Drives pattern. It allows us to place a very tight stop – just above this pattern.

    Commander in Pips: Very good. And which one will you choose?
    Pipruit: I will probably choose the first way. It’s not so far, because we trade on an hourly chart, but it’s much safer and logical in terms of probability than the third way of stop placing. Besides, as you can see, the market has reached third drive target right in the point of AB-CD completion and only after that retested this highs, cleared them and shown engulfing. So, applying third approach to stop placing could lead you to need to re-enter, while using first way holds your stop untouched.​
    Commander in Pips: Excellent.
    TOURADA likes this.
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