Harnessing the power of Harmonic Trading to improve your FX trading potential

My journey in harmonics came from a background of using Fibonacci Retracements and Extensions for the better part of two decades. It was a natural curiosity that led me to study “Fibonacci Patterns” since harmonic trading uses price patterns and Fibonacci ratios to project reversal levels (think support and resistance) in the markets.

First Published: e-Forex Magazine 47 / Traders Workshop / April, 2012

Traders and investors who use Fibonacci Retracement and Extension levels are already familiar with the idea that price action does have some organization into recognizable patterns of contraction and expansion. The turning points identified by Fibonacci (and harmonic analysis) are the inflection points of the patterns where the natural ebb and flow of market participation begin. The application of these turning points is much like the use of any support or resistance level; it must be considered within the context of the underlying psychology of the market or trend and can be confirmed with other types of analysis to establish more reason for the market to react at that level. Much like Fibonacci Retracements and Extension - where the rally or sell-off used will determine how the support and resistance of the projected levels will be laid across a chart - there is subjectivity in the structure of harmonic analysis. It’s the relationship to the Fibonacci ratios which give these patterns structure and...continued

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