CUSTOM HARMONIC PATTERN VALIDATOR

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This tool is one of two specials in the harmonic tools, it aims to validate any 5-points move with respect to a custom set of Fibonacci relations and conditions.

The conditions can be chosen from 111 Fibonacci levels, representing 14 Fibonacci relations (8 common, 6 exotic), with the ability to choose specific level(s) or range of levels for any chosen relation.

The tool functions exactly like all the other harmonic tools, including the ability to save patterns with detailed data and the ability to send a trade setup from this tool to the "Custom Trade" tool.

In this page we are aiming to demonstrate the tool in details and how it integrates with the other tools in the kit, to accomplish that we will be using a real 2618 pattern as an example throughout the page, which is the same pattern used to illustrate "Fibonacci Path" tool. That pattern started forming in the H1 chart for EUR/NZD on 19-Apr-2016 13:00.
The sections in this page will cover the available Fibonacci relations and levels that can be used to set a custom pattern, tool's data flow within the toolkit, in-depth demonstration for the process of setting up the conditions, rates' path input method, in-depth demonstration for the pattern progression, trading a pattern, and saving a pattern.

AVAILABLE FIBONACCI RELATIONS AND LEVELS

POINT B

Choose to validate against either one of 2 Fibonacci relations (1 common, 1 exotic), with the ability to choose any custom Fibonacci range or level(s) within the chosen relation.

XA retracement - from A
RELATION TYPE

Common

VALIDATION FIBONACCI LEVELS

7

RELATION DIRECTION

Normal for both initiating and completing swings

Fibonacci retracement levels (38.2%, 50.0%, and 61.8%) are used to illustrate the relation (those levels are used in Cypher pattern)

Point B illustration: XA retracement - from A

point B illustration: XA retracement - from A

XA projection - from A
RELATION TYPE

Exotic

VALIDATION FIBONACCI LEVELS

9

RELATION DIRECTION

Normal for both initiating and completing swings

Fibonacci projection levels (161.8%, 200.0%, 224.2%, and 261.8%) are used to illustrate the relation

Point B illustration: XA projection - from A

point B illustration: XA projection - from A

POINT C

Choose to validate against any of 6 Fibonacci relations (2 common, 4 exotic), with the ability to choose any custom Fibonacci range or level(s) within the chosen relation.

AB retracement - from B
RELATION TYPE

Common

VALIDATION FIBONACCI LEVELS

7

RELATION DIRECTION

Normal for both initiating and completing swings

Fibonacci retracement levels (38.2%, 50.0%, 61.8%, 78.6% & 88.6%) are used to illustrate the relation (those levels are used in all harmonic patterns, except Cypher)

Point C illustration: AB retracement - from B

point C illustration: AB retracement - from B

XA extension - from X
RELATION TYPE

Common

VALIDATION FIBONACCI LEVELS

9

RELATION DIRECTION

Normal for both initiating and completing swings

Fibonacci extension levels (127.2% & 141.4%) are used to illustrate the relation (those levels are used in Cypher pattern)

Point C illustration: XA extension - from X

point C illustration: XA extension - from X

XA retracement - from X
RELATION TYPE

Exotic

VALIDATION FIBONACCI LEVELS

7

RELATION DIRECTION

Inverted for initiating swing, normal for completing swing

Fibonacci retracement level 78.6% is used to illustrate the relation

Point C illustration: XA retracement - from X

point C illustration: XA retracement - from X

AB projection - from B
RELATION TYPE

Exotic

VALIDATION FIBONACCI LEVELS

9

RELATION DIRECTION

Normal for both initiating and completing swings

Fibonacci projection levels (127.2%, 141.4%, 161.8& & 200.0%) are used to illustrate the relation

Point C illustration: AB projection - from B

point C illustration: AB projection - from B

XA retracement - from A
RELATION TYPE

Exotic

VALIDATION FIBONACCI LEVELS

7

RELATION DIRECTION

Normal for initiating swing, inverted for completing swing

Fibonacci retracement levels (23.6% & 38.2%) are used to illustrate the relation

Point C illustration: XA retracement - from A

point C illustration: XA retracement - from A

XA extension - from A
RELATION TYPE

Exotic

VALIDATION FIBONACCI LEVELS

9

RELATION DIRECTION

Inverted for both initiating and completing swings

Fibonacci extension levels (161.8%, 200.0%, 224.2% & 261.8%) are used to illustrate the relation

Point C illustration: XA extension - from A

point C illustration: XA extension - from A

POINT D (PRZ)

Choose to validate against up to 3 relations of the 6 Fibonacci relations (5 common, 1 exotic), with the ability to specify the critical relation, and any custom Fibonacci range or level(s) for the two complementary relations.

XA retracement - from A
RELATION TYPE

Common

VALIDATION FIBONACCI LEVELS

7

RELATION DIRECTION

Normal for both initiating and completing swings

Fibonacci retracement levels (50.0%, 61.8% & 78.6%) are used to illustrate the relation

Point/PRZ D illustration: XA retracement - from A

point D (PRZ) illustration: XA retracement - from A

XA extension - from A
RELATION TYPE

Common

VALIDATION FIBONACCI LEVELS

9

RELATION DIRECTION

Inverted for initiating swing, normal for completing swing

Fibonacci extension levels (161.8%, 200.0%, 224.2% %amp; 261.8%) are used to illustrate the relation

Point/PRZ D illustration: XA extension - from A

point D (PRZ) illustration: XA extension - from A

BC projection - from C
RELATION TYPE

Common

VALIDATION FIBONACCI LEVELS

9

RELATION DIRECTION

Normal for both initiating and completing swings

Fibonacci projection level (112.9%, 127.2%, 141.4% & 161.8%) are used to illustrate the relation

Point/PRZ D illustration: BC projection - from C

point D (PRZ) illustration: BC projection - from C

AB=CD
RELATION TYPE

Common

VALIDATION FIBONACCI LEVELS

8

RELATION DIRECTION

Normal for both initiating and completing swings

AB=CD patterns (127.2%, 141.4%, 161.8%, 200.0%, 224.2% & 261.8%) are used to illustrate the relation

Point/PRZ D illustration: AB=CD

point D (PRZ) illustration: AB=CD

XC retracement - from C
RELATION TYPE

Common

VALIDATION FIBONACCI LEVELS

7

RELATION DIRECTION

Normal for both initiating and completing swings

Fibonacci retracement levels (50.0%, 61.8% & 78.6%) are used to illustrate the relation

Point/PRZ D illustration: XC retracement - from C

point D (PRZ) illustration: XC retracement - from C

BC retracement - from C
RELATION TYPE

Exotic

VALIDATION FIBONACCI LEVELS

7

RELATION DIRECTION

Normal for both initiating and completing swings

Fibonacci retracement levels (50.0%, 61.8%, 78.6% & 88.6%) are used to illustrate the relation

Point/PRZ D illustration: BC retracement - from C

point D (PRZ) illustration: BC retracement - from C

Validation of any relation can be set to accept any rate that falls within the chosen Fibonacci range, or only accept rates that are around the included Fibonacci levels of that range. The only exception is the critical relation, which must be a single Fibonacci level. Both validation types are used below in "setting up the conditions" section.

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 "Custom Harmonic" tool

detailed data flow from/to "Custom Harmonic" tool

A custom harmonic pattern can be directly saved to history once the pattern reach proactive status for its final point(PRZ).

When "take trade" button is used, the tool will automatically save the pattern to history and send the trade setup to "Custom Trade" trading tool.

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

SETTING UP A CUSTOM PATTERN VALIDATOR

Below we will go step by step through the process of configuring the tool to validate 2618 patterns, since we are going in-depth, we will be covering the thought process of how to convert all the conditions of a 2618 pattern (point B, point C, critical point D, stop loss, targets) to Fibonacci relations, and how to set those concluded conditions, which the tool will use to validate any given 5-point path.

Setting up a custom pattern is a one-time process, it stays active as long as the validation conditions for the patterns don't need to change.

SETTING POINT B CONDITIONS

"Custom Harmonic" tool settings - determining the Fibonacci relation for point B

point B condition illustration

DETERMINING THE FIBONACCI RELATION

The first condition for a 2618 pattern can be a "double top" or "double bottom".

Both can easily be translated to a very simple Fibonacci relation for point B, a 100% retracement of the first swing (XA).

"Custom Harmonic" tool settings - configuring the Fibonacci relation for point B

point B condition setup (modified screenshot)

SETTING THE FIBONACCI RELATION

Under "Active relation", "XA retracement - from A" is selected, the available levels for that relation will be enabled. In our example, only a single level will be used, so both range values are set to "100.0%".

Under "Validation type" setting, any of the two available options can be selected since only one retracement level (100.0%) is needed for that relation.

SETTING POINT C CONDITIONS

"Custom Harmonic" tool settings - determining the Fibonacci relation for point C

point C condition illustration

DETERMINING THE FIBONACCI RELATION

The second condition for a 2618 pattern, is that the price should break the mid-point between the double top or double bottom, which is point A.

This can be translated to either one of the two Fibonacci relations (AB projection - from B) or (XA extension - from X).

For our example, the exotic relation (AB projection - from B) will be used. For the levels, the 112.9% level will be ignored to ensure that it's not a false or weak break of structure, and 200.0% will be set as maximum so that it wont be too extreme. Therefore, range will be (127.2% to 200.0%).

"Custom Harmonic" tool settings - configuring the Fibonacci relation for point C

point C condition setup (modified screenshot)

SETTING THE FIBONACCI RELATION

Under "Active relation", "AB projection - from B" is selected, the available levels for that relation will be enabled. Both levels concluded before (127.2% & 200.0%) are selected, the arrangement doesn't matter.

Under "Validation type" setting, "Whole Fibonacci range" is selected since the only condition is the break of point A. If further refining to the valiated patterns is needed, "Fibonacci levels only" can be selected to mark point C as valid only if it is around one of the included levels, according to the deviation entered in the path setup.

SETTING POINT D CONDITIONS

"Custom Harmonic" tool settings - determining the Fibonacci relation for point D (PRZ)

point D condition illustration

DETERMINING THE FIBONACCI RELATION

The last condition for a 2618 pattern, is a 61.8% retracement of the swing that broke the structure, which is BC.

Very straight forward, only a single relation for the last point is needed, a 61.8% BC retracement - from C.

The 2618 is like the Cypher pattern, it doesn't have a PRZ, just a single critical relation with no complementary relations.

"Custom Harmonic" tool settings - configuring the Fibonacci relation for point D (PRZ)

point D condition setup (modified screenshot)

SETTING THE FIBONACCI RELATION

Under "Critical relation", "BC retracement - from C" is selected, the available Fibonacci levels for that relation will be enabled. 61.8% Fibonacci level is selected for the "Critical Relation", while "Disabled" is selected for both "Complementary relation 1" and "Complementary relation 2".

SETTING STOP LOSS CONDITIONS

"Custom Harmonic" tool settings - determining the Fibonacci relation for stop loss

stop loss condition illustration

DETERMINING THE FIBONACCI RELATION

The stop-loss in 2618 pattern is the level created by the double top or double bottom.

That can be translated to a Fibonacci relation using 100% retracement of the swing (BC).

"Custom Harmonic" tool settings - configuring the Fibonacci relation for stop loss

stop loss condition setup

SETTING THE FIBONACCI RELATION

The stop loss automaticlly uses the same critical relation, thus selecting (100.0%) retracement level.

The exact 100.0% retracement itself isn't logical to be used for the stop loss trigger since there is a double top or double bottom at that rate making it a strong support, therefore under the "Stop loss safety", "% of critical swing" is selected and 5.0% is entered. That will significantly decrease the probability of stop loss being triggered by a fake or minor break.

SETTING TAKE PROFIT CONDITIONS

"Custom Harmonic" tool settings - determining the Fibonacci relation for take profit

take profit condition illustration

DETERMINING THE FIBONACCI RELATION

The target of a 2618 pattern is the nearest price structure, which will be point C.

That can be translated to a Fibonacci relation using 100% retracement of (CD).

"Custom Harmonic" tool settings - configuring the Fibonacci relation for take profit

take profit condition setup

SETTING THE FIBONACCI RELATION

The targets in the tool always come in pairs (T1 & T2), and the one to be traded is decided freely when sending a trade from this tool to the "Custom Trade" tool.

Therefore, under the "Take profit" setting, (61.8% & 100.0% of CD) is selected and when a pattern is found valid, the target will be chosen upon sending the pattern to the trading tool.

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

"Custom Harmonic" tool input

tool's input

This is where the rates for the path is entered to be validated against the Custom Harmonic pattern conditions, 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 EUR/NZD, 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 5-points path (rates) creating the pattern are entered here sequentially.

TOOL PROGRESSION IN-DEPTH

The tool starts providing proactive rates as soon as points X & A are entered, and validation starts as soon as point B 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 the example 2618 pattern.

  • 1
    X, A
  • 2
    X, A, B
  • 3
    X, A, B, C
  • 4
    X, A, B, C, D
"Custom Harmonic" tool flow at swing XA - overview

When only X and A rates are entered, both rates will be validated for errors only as there are no pattern conditions at this point.
If no errors found, point B will be in proactive status, providing the proactive ideal rate(s) and acceptable range(s) as per the custom settings for that point.

"Custom Harmonic" tool flow at point B - overview

When (X, A and B) rates are entered, point B will be validated according to the custom pattern conditions for that point.
If B is found valid, point C will be in proactive status, providing the proactive ideal rate(s) and acceptable range(s) as per the custom settings for that point.

"Custom Harmonic" tool flow at point C - overview

When (X, A, B and C) rates are entered, point C will be validated according to the custom pattern conditions for that point.
If C is found valid, point/PRZ D will be in proactive status, providing proactive ideal rates for the PRZ component(s) as per the custom settings for the PRZ, and the acceptable range around it.

"Custom Harmonic" tool flow at point/PRZ D - overview

When (X, A, B, C and D) rates are entered, point D will be validated against the custom point/PRZ conditions for the pattern.
Whether the pattern is found valid or not, it can be saved or traded at this phase as needed.

XA SWING

"Custom Harmonic" pattern progression at XA swing

custom harmonic pattern progression at XA swing

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

POINT B

As per our settings for the 2618 pattern, point B can only be a 100.0% XA retracement - from A.

For this point, deviation entered in the path setup will be calculated with respect to swing XA since the Fibonacci relation set for this point is based on swing XA.

There are two validation methods available for this point, either "Fibonacci levels only" or "Whole Fibonacci range". As per our conclusion in the pattern settings discussed earlier, either method can be used and will provide the same result.

Point B can either be in proactive or validation status, both explained below using the example 2618 pattern.

"Custom Harmonic" pattern progression at proactive point B

custom harmonic pattern progression at proactive point B

PROACTIVE STATUS

When only (X & A) points are defined, point B will be in proactive status.

The ideal rate for point B is generated according to the Fibonacci levels chosen for that point (100.0% XA retracement - from A) which is ofcourse the rate of point X, and the acceptable range around this rate is calculated as per deviation value entered in the path setup.

"Custom Harmonic" pattern progression at validation of point B

custom harmonic pattern progression at validation of point B

VALIDATION STATUS

When (X, A & B) are defined, point B will be in validation status.

Validation will take place according to the validation method chosen in the pattern settings, and deviation value entered in the path setup.

Precision of point B is calculated with respect to the nearest Fibonacci ratio of the chosen relation, which in our case is 100.0%.

If point B is found valid, the pattern progression will continue to the next phase "Proactive C", otherwise the pattern will be marked as invalid in the watch window.

POINT C

As per our settings for the 2618 pattern, point C can be anywhere between (127.2% to 200.0%) AB projection - from B.

For this point, deviation entered in the path setup will be calculated with respect to swing AB since the Fibonacci relation set for this point is based on swing AB.

There are two validation methods available for this point, either "Fibonacci levels only" or "Whole Fibonacci range". As per our conclusion in the pattern settings discussed earlier, the currently active method will validate with respect to the whole range.

Point C can either be in proactive or validation status, both explained below using the example 2618 pattern.

"Custom Harmonic" pattern progression at proactive point C

custom harmonic pattern progression at proactive point C

PROACTIVE STATUS

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

The ideal rate for each of the 4 possible retracements will be generated, and the acceptable range around each of them with respect to the deviation value entered in the path setup and validation method chosen.

"Custom Harmonic" pattern progression at validation of point C

custom harmonic pattern progression at validation of point C

VALIDATION STATUS

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

Validation will take place according to the validation method chosen in the pattern settings, and deviation value entered in the path setup.

Precision of point C is calculated with respect to the nearest ideal rate of the calculated retracements.

If point C is found valid, pattern progression will continue to the next phase "Proactive PRZ", otherwise the pattern will be marked as invalid in the watch window.

A pattern can be saved at this point, it will be saved using only (X, A, B, and C) points.

POINT D (PRZ)

As per our settings for the 2618 pattern, reversal is expected around a single critical relation with no complementary relations, however we are using the term PRZ to define the range (zone) created around that rate as a result of deviation entered in the path setup.

PRZ is specified by adding the deviation entered on both sides of the following relation:

  • Critical relation: 61.8% BC retracement - from C

For this point, deviation entered in the path setup will be calculated with respect to BC swing, the swing originating the critical relation.

D point/PRZ can either be in proactive or validation status, both explained below using the example 2618 pattern.

"Custom Harmonic" pattern progression at proactive PRZ

custom harmonic pattern progression at proactive PRZ

PROACTIVE STATUS

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

The ideal rate for for the critical relation will be generated, and the acceptable range around that rate with respect to the deviation entered in the path setup.

With having all the data for a possible point D, observing the price action in this phase is very important as the pattern is heading towards it's final phase.

The "take trade" option is enabled at this phase. If not overriden, the entry rate sent to the "Custom Trade" trading tool will be the critical relation's rate.

"Custom Harmonic" pattern progression at validation of PRZ

custom harmonic pattern progression at validation of PRZ

VALIDATION STATUS

When (X, A ,B ,C and D) are defined, the whole pattern is complete and it will be marked in the watch window as "Pattern complete" if rate of point D is within the acceptable PRZ range, or "Invalid" if it out of that range.

Validation will take place according to the calculated PRZ.

Precision of point D is generated with respect to ideal rate of the critical relation (61.8% BC retracement - from C).

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

TRADING A CUSTOM HARMONIC PATTERN

"Custom Harmonic" tool - trading a pattern

custom harmonic tool - trading a pattern

The ability to send a pattern to the "Custom Trade" tool is enabled as soon as point C is marked valid.

When "take trade" button is pressed, the pattern will be automatically saved and the trade setup will be sent as it is to the "Custom Trade" tool to generate the size of the trade according to the active checkpoint's thresholds.

The trading tool will have an active harmonic link, so that when a trade is activated and/or closed, it will be referenced by the harmonic pattern that initiated that trade setup.

Entry, take profit, and stop loss rates sent are dynamic and will be generated according to the settings of the tool, the phase of the pattern, and the active options in the "trade pattern" section.

  • ENTRY RATE
    • If point D isn't yet specified (Proactive PRZ status), the critical relation's rate will be used
    • If point D is specified, its rate will be used
    • If override is enabled, the rate entered will be used
  • TAKE PROFIT
    • Either T1 or T2 will be sent as take profit rate, both are calculated according to the chosen pattern settings.
  • STOP LOSS
    • The stop loss rate to be sent will be calculated according to the chosen pattern settings.

SAVING A CUSTOM HARMONIC PATTERN

Saving a Custom Harmonic pattern can be done either in the phase of a valid point C (proactive PRZ status), or when the pattern is fully completed.

The pattern will be saved with respect to the currency preset and pattern settings at the time of saving, therefore all of the (points' rates, targets and stop loss, points relations) will be saved exactly as seen in the tool.

"Custom Harmonic" tool - saving a pattern

custom harmonic tool - saving a pattern

TRACKING DETAILS
PAIR

Currency pair of the pattern & chart time frame

DATE

Day of pattern initiation

X

Timestamp of the candle respresenting point X

OUTPUT

First hit after point D (T1, T2, SL, NA)

THE PATTERN IN HISTORY TOOL

Click the image above to see a native resolution screenshot for "Harmonic Patterns" history tool, showing the Custom Harmonic 2618 pattern used for demonstrating the tool after saving.