ABCD Pattern Day-Trading

ABCD Chart Pattern

The ABCD pattern is easy to spot in various markets, in any market condition, and on any timeframe. But as a day trader, 5 minute or 15 minutes timeframe chart is more considerable. The abcd pattern should be in every trader’s arsenal of trading patterns and trading strategies. It is one of the most recognizable patterns and can lead to nice gains if traded properly.

What is the ABCD pattern of Fibonacci retracement?

ABCD is a Fibonacci pattern that is a combination of 3 Point Extension and 3 Point Retracement. It is defined by four points A, B, C, and D, of which: Points A, B, and С form a 3 Point Extension pattern. Points B, C, and D form a 3 Point Retracement pattern.

This is why converging patterns help increase probabilities, and allow traders to more accurately determine entries and exits. Each turning point (A, B, C, and D) represents a significant high or significant low on a price chart. These points define three consecutive price swings, or trends, which make up each of the three pattern “legs.” These are referred to as the AB leg, the BC leg, and the CD leg.

Other Chart Patterns In Trading

FXCM is a leading provider of online foreign exchange (FX) trading, CFD trading and related services. Trade your opinion of the world’s largest markets with low spreads and enhanced execution. All legal rights of publications hosted on this website are protected by the international intellectual property legislations. Using any audio, video, and text materials is permitted only if there is a direct link to source materials. It is built from the time of the last leg in the zone from 1.38CD up to 2.681CD. As I have already said in my previous training article, time zones mark the period of time, when a key point should be found.

  • But ABCD pattern trading is one of the most trusted indicators for decision-making because it’s the product of market fundamentals in action.
  • To avoid this kind of situation you can use the trailing stop loss strategy after point (D).
  • Therefore, if any of the legs of the pattern are formed outside of that time frame, then the validity of the pattern is questionable.
  • It should be tested on a demo account before being used in real trading.

You can trade with the ABCD pattern by looking for bullish or bearish reversals. You should enter your trade when the market is in your favor and exit when the market moves against you. There are several time and distance characteristics that traders use to identify the occurrence of an ABCD price chart pattern more precisely. With the ABCD pattern, false buy/sell signals are possible.

Directional Move

In this article, we will take a closer look at what the ABCD pattern is, how to identify it and what are the benefits of using it. The biggest pitfall in ABCD pattern trading is seeing an ABCD pattern where there isn’t one. Active stocks that are subject to large swings over a short time period may show indicators of an ABCD pattern.

ABCD Chart Pattern

Obviously, measuring the numbers independently is not something you can do regularly, and drawing the lines is not ideal as well. For that reason, you can simply use a built-in indicator on your trading platform, set the numbers, and automatically draw the ABCD pattern to a chart. The three price swings include a drop in price from the A to B level, a correction from B to C level, and another decrease from point C to D level. Ultimately, it creates a zigzag pattern where the D point is the ultimate entry point. But no worries, you don’t need to calculate the lines and Fibonacci ratios on your own.

Leave a Comment

Email của bạn sẽ không được hiển thị công khai. Các trường bắt buộc được đánh dấu *

Call Now Button Scroll to Top