CYPHER HARMONIC PATTERN VALIDATOR

in-depth view for forex tool #22
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This tool validates Cypher pattern while providing proactive rates throughout the pattern formation. It uses the common pattern conditions by default, with the ability to fine-tune different settings that doesn't affect the pattern's structure.

Settings available for this tool cover the validation method for point B, validation method for point C, take profit levels, and stop loss safety.

The tool is able to save patterns with detailed data, reload a saved pattern, and send a trade setup to "Custom Trade" trading 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 Cypher pattern as an example throughout the page. That pattern started forming on the H1 chart for USD/JPY on 01-Mar-2016 15:00, and was traded at checkpoint#1.
The sections in this page will cover the default pattern conditions used by the tool, tool's data flow within the toolkit, rates' path input method, in-depth demonstration for the pattern progression, tool's settings, trading a pattern, and saving a pattern.

DEFAULT CYPHER PATTERN CONDITIONS

Cypher, although it doesn't actually have a PRZ, it still have got some subjectivity to it, specifically in the conditions used for point C. The tool have two options for point C that covers the most common validation levels for that point.

Harmonic Cypher default pattern conditions illustration

illustration: Harmonic Cypher default pattern conditions illustration

The Harmonic Cypher pattern is a fairly new pattern that was found by Jason Stapleton, it is also based on the Gartley general M & W structures, with the main difference being that point C isn't contained within the XA swing range. Check Jason's official website to dig more into the pattern.

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 "Cypher" tool

detailed data flow from/to "Cypher" tool

A Cypher 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 Cypher pattern can be reloaded from "Harmonic Patterns" history tool back into this 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

"Cypher" tool input

tool's input

This is where the rates for the path is entered to be validated against Cypher 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.

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 Cypher pattern that was traded on checkpoint #1.

  • 1
    X, A
  • 2
    X, A, B
  • 3
    X, A, B, C
  • 4
    X, A, B, C, D
"Cypher" tool progression 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, the tool will be in "Proactive B" status, providing the proactive ideal rates and acceptable ranges for (38.2%, 50.0%, and 61.8%) XA retracements.

"Cypher" tool progression at point B - overview

When (X, A and B) rates are entered, B will be validated according to the pattern conditions for that point.
If B is found valid, the tool will be in "Proactive C" status, providing proactive ideal rates and acceptable ranges for (127.2% & 141.4%) XA extensions - from X.

"Cypher" tool progression at point C - overview

When (X, 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 rate for the critical relation (78.6% XC retracement - from C) and the acceptable range around that rate. The pattern can be saved or traded at this phase.

"Cypher" tool progression at point D - overview

When (X, A, B, C and D) rates are entered, D will be validated according to the Point/PRZ conditions of the pattern.
Whether the pattern is found valid or not, it can be saved or traded at this phase as per your preference.

XA SWING

"Cypher" tool progression at XA swing

cypher tool 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

In a Harmonic Cypher pattern, point B can be a (38.2%, 50.0% or 61.8%) XA retracement - from A.

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

There are two validation methods available for this point, either "Fibonacci levels only" or "Whole Fibonacci range", more on that in the settings section below.

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

"Cypher" tool progression at proactive point B

cypher tool progression at proactive point B

PROACTIVE STATUS

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

The ideal rates for point B will be generated, and the acceptable ranges around each rate with respect to the deviation value entered in the path setup.

Obviously, AB swing is never traded, but knowing the possible range for point B in advance provides the ability to observe the price action around it and watch the pattern evolve from its very first phase.

"Cypher" tool progression at validation of point B

cypher tool progression at validation of point B

VALIDATION STATUS

When (X, A, and B) points are defined, 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 B is calculated with respect to the nearest ideal rate of (38.2%, 50.0% or 61.8%) XA retracement - from A.

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

In a Harmonic Cypher pattern, point C can be a (127.2% or 141.4%) XA extension - from X..

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

There are two validation methods available for this point, either "127.2% XA extension" or "127.2% to 141.4% XA extension", more on that in the settings section below.

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

"Cypher" tool progression at proactive point C

cypher tool 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 rates for point C will be generated, and the acceptable range(s) with respect to the deviation value entered in the path setup.

Although at this point there is one Fibonacci relation already formed at point B, BC swing isn't a swing to be traded due to the fact that there is no target to aim for. Just like AB swing, proactive ideal rates and range(s) are provided so a trader can continue observing the pattern progression and watch the price action as the pattern evolves.

"Cypher" tool progression at validation of point C

cypher tool 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 (127.2% or 141.4%) XA extension - from X.

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.

CD swing is sometimes traded by the more aggressive traders (entering the market when they believe C point is formed, with the PRZ being the target and stop loss beyond rate of point C). The tool doesn't calculate CD swing trades, however for aggressive traders who want that kind of trades, the proactive PRZ data can be helpful in defining a target.

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

POINT D (PRZ)

In a Harmonic Cypher 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: 78.6% XC retracement - from C

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

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

"Cypher" tool progression at proactive PRZ

cypher tool 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.

"Cypher" tool progression at validation of PRZ

cypher tool 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 (78.6% XC retracement - from C).

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

This pattern was traded in the previous phase "Proactive PRZ" and all the screenshots except this one was taken at that phase. Adding the rate of point D after entering the trade can be useful in recalculating and adjusting take profit rate according to actual rate point D (113.207 in our example).

TOOL'S SETTINGS

"Cypher" tool settings

tool's settings

Settings to fine-tune the tool

There are 4 settings available for this tool covering validation method for each of point B and point C, take profit targets, and stop loss safety. Those settings can be used to tailor the tool exactly around a certain forex trading style for Cypher patterns.

B VALIDATION

"Cypher" tool setting for point B - Fibonacci levels only

cypher tool setting for point B - Fibonacci levels only

FIBONACCI LEVELS ONLY

This is the default validation method for point B used by the tool, it marks the point as valid only if it falls within one of the acceptable ranges around each of (38.2%, 50.0%, 61.8%) XA retracements.

Each retracement's range is specified by adding the deviation percentage entered in the path setup around both sides of the ideal percentage for that retracement.

For example, if deviation is set to 1.000%, point B will be marked valid if its actual rate is between any of the following XA retracement ranges (37.2% to 39.2%, 49.0% to 51.0%, or 60.8% to 62.8%).

"Cypher" tool setting for point B - Whole Fibonacci range

cypher tool setting for point B - Whole Fibonacci range

WHOLE FIBONACCI RANGE

When this setting is enabled, point B is marked valid only if it falls within the range created by the highest and lowest XA retracements.

This range is specified by adding the deviation percentage entered in the path setup around both ends of the range (38.2% to 61.8%).

For example, if the deviation is set to 1.000%, point B will be marked valid if its actual rate is between (37.2% to 62.8%) XA retracement.

C VALIDATION

"Cypher" tool setting for point C - Fibonacci level only

cypher tool setting for point C - Fibonacci level only

FIBONACCI LEVELS ONLY

When this setting is enabled, it marks point C as valid only if it falls within the acceptable range around 127.2% XA extension - from X.

The retracement's range is specified by adding the deviation percentage entered in the path setup around both sides of the ideal percentage of the retracement.

For example, if deviation is set to 1.000%, point C will only be marked valid if its actual rate is between (126.2% to 128.2) XA extension - from X.

"Cypher" tool setting for point C - Whole Fibonacci range

cypher tool setting for point C - Whole Fibonacci range

WHOLE FIBONACCI RANGE

This is the default validation method for point C used by the tool, it is marked valid only if it falls within the range created by (127.2% to 141.4%) XA extension - from X.

This range is specified by adding the deviation percentage entered in the path setup around both ends of the range (127.2% to 141.4%).

For example, if the deviation is set to 1.000%, point C will only be marked valid if its actual rate is between (126.2% to 142.4%) XA extension - from X.

TAKE PROFIT TARGETS

"Cypher" tool setting for targets: 38.2% and 61.8% of CD

cypher tool setting for targets: 38.2% and 61.8% of CD

RETRACEMENT OF CD (38.2% and 61.8%)

This is the default targets setting used by the tool, both targets will be calculated with respect to CD, where T1 will be 38.2% of CD and T2 will be 61.8% of CD.

"Cypher" tool setting for targets: 61.8% and 100.0% of CD

cypher tool setting for targets: 61.8% and 100.0% of CD

RETRACEMENT OF CD (61.8% and 100.0%)

When this setting is enabled, both targets will be calculated with respect to CD, where T1 will be 61.8% of CD and T2 will be 100.0% of CD.

STOP LOSS SAFETY

"Cypher" tool setting for stop loss safety

cypher tool setting for stop loss safety

This setting will determine how the stop loss rate is calculated, in a Harmonic Deep Crab pattern the absolute stop loss threshold is the rate of point X (100% XC retracement - from C).

It is better to give the pattern some room to breathe beyond that rate in case of a false break, that breathing area "safety zone" can be identified by either entering the pip distance beyond X, or by entering a percentage of XC swing (which is the origin of the critical relation).

For example, to set the stop loss rate to be further away beyond rate of point X, entering 12.9% and choosing (% of XC) option will result in stop loss rate being calculated as 112.9% XC retracement - from C.

The default setting used by the tool is (7.5% of XC).

TRADING A CYPHER PATTERN

"Cypher" tool - trading a pattern

cypher 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 CYPHER PATTERN

Saving a Cypher 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.

"Cypher" tool - saving a pattern

cypher 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 Cypher pattern used for demonstrating the tool after saving.