Chapter 19, Part I. Harmonic Approach to Recognizing a Trend Day Page 6

Some prompts from higher time frames

Also you can get some confirmation of trending day from a higher time frame. Look at the followed picture:

Chart #5 |60-min EUR/USD


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Since we trade on 5-min chart, our trading session will be the 15th of June, in the yellow rectangle. Of course we do not know that this really strong move down will happen. All that we do know is the Fib support levels. But here is a clue. The point is that in a trending environment the market has very typical style of behavior around Fib levels of higher time frames. Let’s drop the time frame and look at rectangle on 5-min chart:

Chart #6 | 5-min EUR/USD


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First of all we see the same accelerations to the down side and 11-18 pips retracement. Only single AB-CD, relatively pure, around 0.5 Fib level. But the most interesting is that the market shows consolidations after breakouts of significant levels. See – it breaks 0.382 and turns to consolidation between 0.382-0.5, further breaks 0.618 – consolidation right above 0.786. Second is retesting of broken levels with AB-CD patterns - for example, retesting of 0.382 before breakout of 0.5. This kind of price action, when market after breakout of some level stands above the next level tells that move will continue so as retesting of broken levels from another side.

Pipruit: And so what?

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Commander in Pips: Think for yourself! It gives you a huge advantage to trade it. You can place very tight stops with very shallow risk – knowing harmonic numbers and knowing the way the market behaves around higher time frame Fib levels.