harmonic patterns are becoming increasing popular in forex trading. Harmonic patterns can be classified as internal patterns or external patterns. Internal patterns include structures such as the gartley and bat. External patterns include structures such as the butterfly and crab. In todays lesson, we will discuss the butterfly extension pattern.
the harmonic pattern butterfly is closely related to the gartley 222 pattern with the main difference being that the butterfly patterns cd extends beyond the xa leg. The gartley butterfly pattern is also identified by the classic m and w patterns. The butterfly pattern was one of the many harmonic patterns developed by h.
The main characteristics of the butterfly pattern forex are that its not a rigorous reversal pattern. The butterfly pattern trading is more about a corrective price structure that usually establishes important swing low and high prices.
The butterfly pattern, the general extension structure of the butterfly pattern was discovered by bryce gilmore. However, the exact alignment of ratios was defined in scott carneys 1998 bookthe harmonic trader.
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The butterfly pattern is a reversal pattern composed of four legs, similar to the gartley and bat pattern, marked x-a, a-b, b-c and c-d. It helps you identify when a current price move is likely approaching its end. This means you can enter the market as the price reverses direction.