AB=CD HARMONIC PATTERN VALIDATOR

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This tool validates a total of 8 different AB=CD patterns while providing proactive rates throughout the patterns formation.

The patterns validated by the tool are, the Equivalent AB=CD pattern, 4 Alternate AB=CD patterns, and 3 Extreme AB=CD patterns.

The tool is able to save patterns with detailed data, and reload a saved pattern. It doesn't have the functionality of sending a trade setup to "Custom Trade" tool since it is not intended to be a trading tool on its own, its main goal is to be used side by side with the other harmonic tools in the kit.

The majority of harmonic patterns have an AB=CD pattern as one of the complementary relations in the PRZ, this tool can focus more on that single relation and break it down to its own components, providing more depth to the analysis of the pattern and more data that can be used to make reliable forex trading decisions.

The pattern used to demonstrate the tool is an (Alternate 112.9% AB=CD) that started forming in the H1 chart for NZD/USD on 20-Jan-2016 10:00, the pattern's swings are the same from the Butterfly pattern demonstrated here, showing how this tool can be used alongside the other Harmonic tools for more data and depth in analysis.
The sections in this page will cover the 8 validated AB=CD patterns, tool's data flow within the toolkit, what is the PRZ in these patterns, rates' path input method, in-depth demonstration for the pattern progression, and saving a pattern.

THE 8 VALIDATED AB=CD PATTERNS

EQUIVALENT AB=CD

primary pattern
Equivalent AB=CD pattern illustration

equivalent AB=CD pattern illustration

The Equivalent AB=CD pattern is the primary pattern, it is the anchor of calculation for all the other 7 derived patterns.

Both Gartley & Butterfly patterns might have Equivalent AB=CD as one of their two complementary relations. When that it is the case, this tool can provide more in-depth analysis by breaking down the AB=CD complementary relation down to its own two components(rates).

ALTERNATE AB=CD

4 patterns
Alternate (112.9%, 127.2%, 141.4%, 161.8%) AB=CD patterns illustration

alternate AB=CD patterns illustration

The 4 Alternate AB=CD patterns are derived patterns, calculated with respect to the Equivalent AB=CD pattern calculation.

Any of Gartley, Butterfly, Bat, and Deep Crab patterns might have an Alternate AB=CD as one of their two complementary relations. When that it is the case, this tool can provide more in-depth analysis by breaking down the AB=CD complementary relation down to its own two components(rates).

The Alternate 112.9% AB=CD used to demonstrate this tool is one of the two complementary relations for the Butterfly pattern used to demonstrate its own tool.

EXTREME AB=CD

3 patterns
Extreme (200.0%, 224.2%, 261.8%) AB=CD patterns illustration

extreme AB=CD patterns illustration

The 3 Extreme AB=CD patterns are derived patterns, calculated with respect to the Equivalent AB=CD pattern calculation.

Both Alternate Bat & Crab patterns might have Equivalent AB=CD as one of their two complementary relations. When that it is the case, this tool can provide more in-depth analysis by breaking down the AB=CD complementary relation down to its own two components(rates).

TOOL'S DATA FLOW

The below illustration details the type of data flow between this tool and other directly connected tools, to see the bigger picture for the whole toolkit's data flow please check this illustration.

Detailed data flow from/to "AB=CD" tool

detailed data flow from/to "AB=CD" tool

An AB=CD pattern can be directly saved to history once the pattern reach proactive status for its final point(PRZ).

This tool doesn't have "take trade" functionality like most of the other tools since it is not intended to be a trading tool on its own, its main goal is to be used side by side with the other harmonic tools in the kit to provide more depth to their analysis by breaking down one of the complementary relations down to its own two components.

Any saved AB=CD pattern can be reloaded from "Harmonic Patterns" history tool back into this tool.

WHAT IS THE PRZ IN AB=CD ?

PERFECT AB=CD

Perfect AB=CD pattern illustration

perfect AB=CD pattern illustration

AB=CD patterns don't actually have a PRZ, point D in a "perfect" pattern will be a single rate calculated by the reciprocal Fibonacci ratio of C retracement of AB, by using that calculation CD leg will have the same exact length of AB leg.

The example used for illustration shows C point retracing "exactly" 50.0% of AB, resulting in point D being respresented by a single rate for both relations (100.0% projection of AB - from C) & the reciprocal (200.0% projection of BC - from C).

DEVIATED AB=CD

Deviated AB=CD pattern illustration

deviated AB=CD pattern illustration

However, it is almost impossible for C point to reverse "exactly" at one of the Fibonacci ratios, resulting two possible rates for point D created by the absolute length of AB leg and the reciprocal of the nearest Fibonacci retracement to C point.

The example used for illustration shows C point retracing 52.0% of AB, resulting in point D being respresented by two rates for each of the relations (100.0% projection of AB - from C) & the reciprocal (200.0% projection of BC - from C), where the reciprocal is calculated with respect to the nearest Fibonacci retracement (50.0%) for C retracement of AB.

CONCLUSION

AB=CD don't really have a PRZ! But due to the fact that it is almost impossible for point C to retrace exactly at a Fibonacci level, resulting in two calculated rates, we are using the term "PRZ" to describe the range created by those two rates.

TOOL'S INPUT METHOD

Swing rates that define a path for the pattern are entered manually, a method that might not appeal to many forex traders who want a ready to trade pattern. However, the advantages gained by using this method of rates input can't be acquired using any different way.

The ability to validate all harmonic patterns simultaneously using a single path, getting proactive possible rates for the next point(or PRZ), knowing the exact precision of each point, the ability to test expected rates to see if the pattern is worth keeping an eye on. Those are a few advantages gained as a result of using that input method.

PATH TO VALIDATE

"AB=CD" tool input

tool's input

This is where the rates for the path is entered to be validated against all the 8 validated AB=CD patterns, below is an explanation for the 3 inputs controlling the path.

The inputs for this section affects all the 10 harmonic tools, the pattern watch window will be updated with all the harmonic tools status whenever a change in path occurs.
Currency preset

This choice will determine the pip's decimal and fractional decimal to be used for calculations. Can be chosen from any of the 6 custom currency presets. Although we are trading NZD/USD, the currency preset selected is EUR/USD as both pairs have the same characteristics.

Deviation setup

This setting sets the "quality" of the pattern by limiting a point to be marked valid only if its deviation is less than or equal the defined deviation value, which can be set to any number between 0.250% to 4.750%. Deviation is applied smartly to each point with respect to the swing originating the Fibonacci relation.

Path setup

The 4-points path (rates) creating the pattern are entered here sequentially, rate of point X is irrelevant to this tool but will still affect calculations of all the other harmonic tools.

TOOL PROGRESSION IN-DEPTH

The tool starts providing proactive rates as soon as points A & B are entered, and validation starts as soon as point C is entered. The buttons below can help with understanding what the tool does at each phase of the pattern, while the rest of this section will be a demonstration for the actual progression of an AB=CD pattern.

  • 1
    A, B
  • 2
    A, B, C
  • 3
    A, B, C, D
"AB=CD" tool progression at swing AB - overview

When only A and B rates are entered, both rates will be validated for errors only as there are no pattern conditions at this point.
If no errors found, the tool will be in "Proactive C" status, providing proactive ideal rates and acceptable ranges for (38.2%, 50.0%, 61.8%, 78.6%, and 88.6%) AB retracements - from B

"AB=CD" tool progression at point C - overview

When (A, B and C) rates are entered, C will be validated according to the pattern conditions for that point.
If C is found valid, the tool will be in "Proactive PRZ" status, providing proactive ideal rates for the PRZ components of all the 8 patterns, and the acceptable range around each of them.

"AB=CD" tool progression at point D - overview

When (A, B, C and D) rates are entered, D will be validated against all the 8 PRZs for the patterns.
Whether the pattern is found valid or not, it can be saved at this phase.

AB SWING

"AB=CD" tool progression at AB swing

AB=CD tool progression at AB swing

Defining rates for (A & B) points will initiate the tool, the rates will only be checked for errors since there is no actual validation conditions for this swing.

POINT C

In any of the 8 AB=CD patterns, point C can be a (38.2%, 50.0%, 61.8%, 78.6%, or 88.6%) AB retracement - from B.

For this point, deviation entered in the path setup will be calculated with respect to AB swing.

Point C can either be in proactive or validation status, both explained below using the example AB=DC pattern.

"AB=CD" tool progression at proactive point C

AB=DC tool progression at proactive point C

PROACTIVE STATUS

When (A, and B) points are defined and didn't return errors in values, point C will be in proactive status.

The ideal rate for each of the 5 possible retracements will be generated, and the acceptable range around each of them with respect to the deviation value entered in the path setup.

"AB=CD" tool progression at validation of point C

AB=DC tool progression at validation of point C

VALIDATION STATUS

When (A, B and C) points are defined, point C will be in validation status.

Validation will take place with respect to the deviation value entered in the path setup.

Precision of point C is calculated with respect to the nearest ideal rate of AB retracement - from B.

If point C is found valid, pattern progression will continue to the next phase "Proactive PRZ" and the reciprocal Fibonacci relations used for calculating the PRZs are provided(below image), otherwise the pattern will be marked as invalid in the watch window.

"AB=CD" reciprocal Fibonacci relations

AB=DC reciprocal Fibonacci relations

POINT D (PRZ)

In a Harmonic AB=CD pattern, reversal is expected to occure within the potential reversal zone(PRZ), that PRZ consists of two Fibonacci relations:

  • 100.0% AB projection - from C
  • BC projection - from C (reciprocal of the nearest Fibonacci match for C retracement of AB)

For all the 8 PRZs, deviation entered in the path setup will be calculated with respect to AB for the AB projection, and BC for the BC projection. Acceptable deviation will be added on both ends of the PRZ.

The PRZ can either be in proactive or validation status, both explained below using the example AB=CD pattern.

"AB=CD" tool progression at proactive PRZ

AB=CD tool progression at proactive PRZ

PROACTIVE STATUS

When (A, B, and C) points are defined and point C is marked valid, D PRZ will be in proactive status.

The ideal rates for each of the 8 AB=CD patterns will be generated, and the acceptable range around the PRZ for each of them as per deviation value entered in the path setup.

"AB=CD" tool progression at validation of PRZ

AB=CD tool progression at validation of PRZ

VALIDATION STATUS

When all (A, B, C and D) points are defined, all the 8 AB=CD patterns will be in validation status.

Validation will take place according to the acceptable PRZ range of each pattern, with respect to deviation value specified in the path setup.

Whether a pattern is valid or not, it can be saved or traded at this phase.

SAVING AN AB=CD PATTERN

Saving an AB=CD pattern can only be done when the pattern is fully completed.

A pattern will be saved with respect to the currency preset, therefore all of the points' rates and relations will be saved exactly as seen in the tool.

"AB=CD" tool - saving a pattern

AB=CD tool - saving a pattern

TRACKING DETAILS
PAIR

Currency pair of the pattern & chart time frame

DATE

Day of pattern initiation

A

Timestamp of the candle respresenting point A

OUTPUT

Always saved with NA as the 1st hit

THE PATTERN IN HISTORY TOOL

Click the image above to see a native resolution screenshot for "Harmonic Patterns" history tool, showing the AB=CD pattern used for demonstrating the tool after saving.