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Trading with the Shark Harmonic Pattern

The Shark Harmonic Pattern is one trading approach that offers a simple yet effective way to identify important Support and Resistance points using Fibonacci Retracement. If you've been following analyses on Seputarforex, you may often encounter various terms related to harmonic patterns used as technical guidelines. One of the patterns that hasn't been widely discussed is the Shark Harmonic Pattern. However, before we delve deeper, let's understand the definition and origin of this pattern.

Understanding the Shark Harmonic Pattern

The Shark Harmonic Pattern was first introduced by Scott M. Carney, a professional stock trader, through his book titled "Harmonic Trading" in 2010. Visually, this pattern resembles the Cypher Pattern; where the highs and lows are always higher than the previous peaks and troughs. However, the difference lies in the starting point of the pattern, where the Shark Harmonic Pattern begins from point 0, whereas the Cypher Pattern starts from point A. This pattern consists of five points, forming the framework of the 5-0 pattern (0, X, A, B, C, D). One characteristic of the Shark Harmonic Pattern is the larger BC leg, drawn from an extension of 131% from the first leg (0X). The essence of the Shark Harmonic Pattern lies in its ability to detect key Resistance or Support levels from the starting point (0) to point C, with a strong prediction that the price will bounce in the opposite direction.

Trading Process with the Shark Harmonic Pattern

Before starting to trade with harmonic patterns, you need to be able to identify the formation of these patterns on the chart. This is similar to recognizing price patterns (Chart Pattern), but using Fibonacci tools to measure the lengths of these reversal patterns. These pattern legs are crucial for determining where you will open trading positions and when you will close them to realize profits.

Measurement Rules for Shark Harmonic Pattern Legs

  • • 0X leg is drawn from the first Swing High (for Bearish patterns) or the first Swing Low (for Bullish patterns).
  • • XA leg represents a retracement of 38.2% to 61.8% from the 0X leg.
  • • AB line is drawn from the Fibonacci Extension of 113% to 161.8% from the XA line.
  • • The length of BC line is the Fibonacci Extension of 113% from the first line, 0X.
Trading with the Shark Harmonic Pattern

You can trade with harmonic patterns on various timeframes, as long as the price movement meets the predetermined Retracement and Extension conditions. For beginners, it's advisable to use higher timeframes like H4 or Daily to avoid false signals on lower timeframes. For example, if you find a Bearish Shark Harmonic Pattern on the EUR/USD chart (H4), you may consider opening a Short (sell) position when the price reaches the Fibonacci Retracement of 0.88% from the 0X leg. Furthermore, you can close the trading position when the price reaches the Fibonacci Retracement of 50% to 61.8% from the BC line, while also paying attention to reversal candlestick formations. It's important to remember that harmonic patterns do not guarantee 100% accuracy; therefore, you need to set Stop Loss to control risks. A common method used to set Stop Loss is by using Risk/Reward ratios or Fibonacci Extension of 1.15 from the 0X leg.

Advantages and Disadvantages of the Shark Harmonic Pattern

Like all harmonic patterns, the Shark Harmonic Pattern has its strengths and weaknesses. Its strengths include accuracy in highlighting important Resistance and Support levels, flexibility in its use on various timeframes and pairs, and simplicity in using Fibonacci Retracement tools. However, its weaknesses include its signals being subject to change if the formation rules are not strictly adhered to, rarity in higher timeframes, and the possibility of generating false signals outside Retracement or Extension rules.

The Shark Harmonic Pattern is one of the simple yet effective trading methods for identifying crucial Support and Resistance points in price movements. By understanding its formation and usage rules, you can leverage this pattern to enhance your trading success. However, like any other trading method, discipline and good risk management are still necessary to achieve long-term success.

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