Harmonics – The Cypher pattern





                                         -A Forex Trading Perspective-

Like we have explained in our introduction to Harmonics -
https://tinyurl.com/y2ghjqkl, Harmonic Patterns enable traders to determine market turning points with precision and high accuracy levels.

And like all Harmonic Patterns, The Cypher has five points - namely, “XABCD”. As usual, the market will always provide “XA” which is the impulse leg/move. The trader is therefore required to find the remaining points namely; ‘BCD’.
 
Using the Fibonacci-retracement tool, you (the trader) measure and identify BCD points using the following measurement Criteria: -

>Point ‘B’ is 38.2 to 61.8 retracement of leg “XA”.

>Point ‘C’ is between 127.2 and 141.4 expansion of leg “AX”.

 >Point ‘D’ is 78.6 retracement of leg “XC”
 Important to note that; Point “D” is referred to as; Potential Reversal Zone (PRZ).
     
      It should equally be understood that all legs of the Cypher harmonic pattern should complete within the measurements, as provided in the criteria above. Otherwise it cannot be regarded as a valid Cypher harmonic pattern.

It is standard rule in all Harmonic patterns (the Cypher included) that; Stop Loss (SL) should be placed a few pips below point ‘X’.

In as far as profit taking is concerned, first Take Profit (TP) should be placed at point 38.2, and second Take Profit should be placed at 61.8.
      
      It is also very important that a trader knows; at What point to place a Trade, Where exactly to place a Stop loss and When to Take Profit.
     
     Apparently, the Cypher Harmonic pattern works well in a calm market, where for instance breaking news are not centre stage. In this regard, the Cypher could be perfect pattern for newbie traders.

OJ Mwale – Sani Global Forex

Images: Courtesy of BabyPips & TradingStrategyGuide

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