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Harmonic analysis in Forex Part II
07-02-2018 | No Views : 46
In the first part of the harmonics analysis in forex, we discussed the importance of this type of analysis in determining price reflection. We also discussed the AB = CD model, and in this part we will address some other models of harmonic trading.
Gartley model in Harmonic analysisIt is worth mentioning that the model was discovered by writer Gartley in the book profits in the stock market, which is found on page 222 of the book, so we find that the name of the model Harmony Gartley attributed to the finder.
This model consists of five points in the form of four sides. The model starts at point X to end at point D, and the emergence of the Gartley pattern on the chart indicates that the probability of price reversal is high, and the price direction is likely to change.
Configure the Gartley model
- The five-point Gartley model consists of XABCD in four waves, as the pattern starts from point X and then drops to point A, forming the first XA, then ascending to point B to complete the second leg, AB, from which the price drops to point C to complete The third wave or wave in the model is BC, and from point C the price rises to point D The completion point of the model to complete the fourth and last leg CD.
- The Gartley pattern is similar to the downside in the number of points and crosses, but it differs in the price move inside it. The first part of the pattern is bullish. The pattern starts at point X and then climbs to point A to complete the first leg of the XA model. To point B to complete the second leg AB, and from point B the price rises until it reaches point C, to complete the third leg BC, and then the price drops until the point of completion of the model point D, to complete the last leg of the CD model.
Fibonacci ratios in the Gartley model
- 0.382 - 38.2%
- 0.618 - 61.8%
- 0.786 - 78.6%
- 8886 - 88.6%
- 1.27 - 127%
- 1.618 - 161.8%
Fibonacci ratios for each point in the Gartley model:
- Point B comes at 61.8% of the XA wave.
- Fibonacci ratios of point C are between 38.2% and 88.6% for AB leg.
- Point D The complete point of the pattern comes at the corrective level of 78.6% Fibonacci of the XA wave, and is also between 127% and 161.8% Fibonacci of the BC wave.
Confirm the Gartley model in Harmonic analysisThe Gartley model of Harmonic analysis is highly credible, and although it can be relied upon alone, its integration with other financial market analysis instruments is better for the trader. Harmonic analysis can be combined with classical analysis with Japanese candlesticks or liquidity analysis to reach the best. Results.
Example of Gartley's upward modelLooking at the EUR/USD chart in the attached picture, we see the price rise from point X until it reached point A, and it fell to the correct 61.8% Fibonacci level which represents the B point on the model.
After the arrival of the price point B rose again to reach the level of 50% correction which represents point C, and the price fell again until the point D completed the point of completion of the model at 78.6% Fibonacci, causing the price to rise.
We also notice a positive price behavior with the completion of the Gartley harmonic trading pattern and a positive Divergence, adding to the harmonic trading pattern.
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