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Advantages and Disadvantages of Harmonic Patterns

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The term “harmonic patterns” refers to structures that have both graphic and mathematical elements. They are thought to be one of the most accurate tools for doing technical analysis because they let traders predict how prices will move in the future and where the trend is likely to go. Visit MultiBank Group

Harmonic patterns, on the other hand, are much less likely to send wrong signals than many other kinds of technology. This is because, in addition to certain geometric properties, harmonic patterns also need to change in the right ways for them to be valid. Harmonic patterns and visual patterns can be layered on top of each other to make new harmonic patterns. So, looking at the market over different time periods can help you find signals that work well together and give you a better understanding of how the market works.

7 HARMONIC PATTERNS in FOREX TRADING

There is a wide range of harmonic structures, yet the four most common ones have emerged. gartley, butterfly, bat, and crab patterns are all examples of this category.

  • The ABCD patterns
  • The BAT patterns
  • The Gartley patterns
  • The butterfly patterns
  • The crab patterns
  • The deep crab patterns
  • The shark patterns

ADVANTAGES OF HARMONIC PATTERNS

  1. There is complete transparency and exactitude regarding all the data and conditions for the harmonic patterns. The trader is concerned with identifying accurate wave ratios, pivot points, and levels. The process of locating the best entry locations is thereby made much less complicated.
  2. The dependability of the pattern-making process. The veracity of harmonic patterns can be established, not only via the geometric shape, but also through the interactions between the waves. In addition, many complicated forms can be compared not with a single neighbouring, but rather with numerous impulses that each have their own unique ratios.
  3. Harmonic patterns are those that recur frequently enough on the chart to make it possible for traders to incorporate them into their trading strategies on a consistent basis.
  4. The use of harmonic patterns is applicable to every conceivable kind of market and every imaginable timeframe.
  5. It is possible to integrate harmonic patterns with a variety of other technical analysis tools in a productive manner.

DISADVANTAGES OF HARMONIC PATTERNS

  1. The variety of harmonic patterns is quite broad, and the geometry of their arrangements can be quite challenging. Therefore, novice traders often become perplexed and end up making poor choices regarding their trading.
  2. It is not always possible to confirm the pattern by the projection of price fluctuations. The Shark pattern serves as a good illustration of this concept since, if it is reversed, it transforms into a completely other 5-0 design.
  3. The identification of harmonic patterns cannot be done automatically with a technology that is accurate enough.
  4. Patterns that are diametrically opposed to one another can be constructed using the same chart area but on different timescales.
  5. A harmonic pattern in real trading charts that satisfies stringent conditions for aspect ratio is extremely uncommon. As a result of this, the evaluation is becoming more subjective, and there is a greater chance that the prediction will be inaccurate.