Trading based on harmonic formations largely depends on proper measurement of the Fibonacci retracement in relation to individual price movements.

Description of all formations can be found in the article: Harmonic trading – the most effective formations of the system. Harmonic formations are formations of trend continuation.  For this reason, it is important that movement we expect is consistent with earlier trend. Most effective is a formation where point D falls on significant support/resistance.

Harmonic trading EURGBP H4According to analysis from May 24th – “BAT pattern on EURGBP” price has done everything what this formation should do. I pointed out that the pair should rise to 0.8730 and there should be return of bears. This was the case, although demand was able to reach 20 pips higher before falling.

BAT pattern on EURGBP – assumed scenario

Currently price has already begun to decline but there may be another pullback (second and last test of point D) followed by expected downward movement. A double test of the D-point often happens in case of harmonic formations, but does not necessarily occur.

Once the price begins to drop, a fairly dynamic move should lead EURGBP to the point B area. There should be a slowdown of declines and a correction or consolidation should occur thereafter. Sometimes (though seldom) formations are negated by the D-point breaking. Such effective breakouts usually involve appearance of a strong breaking candle, and thus, as in any transaction, the use of Stop Lost is unavoidable.


Harmonic trading EURGBP D1
This formation is supported by resistance that lies in the 0.8730 area and the overall range of EURGBP moves. From February 2017, most of the time price stayed between support 0.8300 and resistance 0.8730. All these facts makes this formation very probable.

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