Harmonic Trading is a method that uses specific price patterns and the alignment of Fibonacci ratios to determine highly probable reversal points (pull backs and or retracements) in the financial markets.
This style of trading and it’s traders believe that patterns or cycles, like many patterns and cycles in life, repeat themselves.
The objective is to identify these patterns, and to enter or to exit a position based upon a high degree of probability of historic price action.
The patterns are not 100% accurate, but in most situations it has been historically proven to be some what reliable. If these set-ups are identified correctly and complete, it could lead to significant opportunities with a very limited risk.
Trades are executed at a price level were the cycle is changing, and or respecting the natural ebb and flow of buying and selling. In doing so, these trades are considered to be executed “in harmony” with the market.
Harmonic Trading works on any time frame – intra-day, daily, weekly or monthly charts. But most of the experienced Harmonic Trades suggest that the clearest trade opportunities, or “set-ups,” appear on daily and hour. charts for position or swing trades.
I tend to agree and would suggest to only trade the larger time frames and to use good money management.
Harmonic trading can be very rewarding if you manage your risk and trades properly.
Below are the common Patterns that tend to show up in all Financial markets that are traded.