Showing posts with label how to trade ABCD. Show all posts
Showing posts with label how to trade ABCD. Show all posts

"ABCD" - Continuation Pattern ( Price Action Trading )

"ABCD" is not a continuation pattern ( our D entry could be or not, in the direction of the trend ). But if we see it like this ( or trade it like this ) we'll spot it earlier and we won't make confusion between this and 1-2-3-4 reversal pattern.

So on the counter trend ABCD pattern, we will have AB = CD and we buy/sell D ( trend direction ).

Ideal ABCD is like this:

Special case 1:

When AB and CD is in the direction of the trend ( and also a powerful trend's impulse ), we might find that AB CD.

So on the trend direction ABCD pattern, we can find that CD = 127.4% from AB ( so not equal in pips ) and we buy/sell D ( as a counter trend direction ).

Practicing this patterns trading while combined with 1-2-3-4 reversal pattern, you will see that these 2 strategies combined with fibs is all that you need most of the time.

* Special case 2: We will study this in "Advanced Strategies".

ABCD Trading Strategy.

Lets say we had the new trend confirmation ( using 1-2-3-4 pattern ) and get the profit between the 2-4 distance. Now we can look after ABCD ( in the direction of the trend/counter trend ).

1. Bought on BO of 2 ( using 1-2-3-4 )
2. TP @ 4 ( using 1-2-3-4 )
3. Use 3 as A, 4 as B
4. C= 61.8% from AB ( we could buy here using PO for fibonacci strategy No 2 )
5. As we going long, we found out that AB=CD (and TP for our buy limit =161.8 % from BC = D)
6. Sell D
7. TP for ABCD = 61.8% from CD.

In this chart we see that we won 2 profits from trading 1-2-3-4 and ABCD. Now we can search for another entries ( in the direction of the trend or counter trend ).
Not longer than 1 swing further we spot something that got our attention again: a powerful retracement that could form AB ( in the direction of the trend ):

* We also could of sold our B as a 50% retracement from previous traded swing ( as ABCD ), but that would have been a counter trend position and we will speak about it on our "Advanced Strategies".
** Also: C is failing to BO lower than 78.6% (yellow fibonacci, candle close above - in case we trade manually). But we would've bought with PO the 61.8%, with SL = previous LL (A).

Now, we have ABC formed:

1. We find that D = 127.4% from BC ( special case ) - we can use a TL and trade it as BO of TL
2. Sell D
3. TP = 61.8% from CD. (olive fibonacci)

Practicing this you will find out that B is sometimes only 50% from AB, or TP is only 50% from CD.
Never the less this pattern, like I said before, is one of the most powerful tool along the 1-2-3-4 pattern and of course Fibonacci retracement tool.

Best regards,