The AB=CD harmonic pattern is a four point price structure. The first part of the price is corrected to some extent and the price movement passes through the price correction range. Fibonacci ratios in this pattern must occur at certain points. In the pattern AB=CD, point C is considered as the completion level of the pattern. Although the expansion of BC is very important in this structure, the most important harmonic number is the exact point of completion of AB=CD.
In the AB=CD pattern, the proportion of Fibonacci ratios in the price structure usually indicates certain interrelationships. The reciprocal of the C point (the same as the correction of the AB wave) is usually an indicator of the extent of BC expansion, which is used to define the most likely retracement range. For example, a correction of 0.618% at point C usually indicates a 1.618% extension of BC, which corresponds to the completion point AB=CD. This interrelationship in identical AB=CD patterns defines the best possible return range (PRZ) for this structure. These mutual ratios that complete the AB=CD structure.
Mutual ratios are necessary to define the range of pattern completion. However, the most important number that should be considered in the pattern is that the expansion of BC should conform to the completion range of the AB=CD pattern.
When we are faced with a massive sell-off in the market, AB=CD bullish retracement pattern can be the best assessment for predicting price movements. Although the symmetry of the pattern may be different, the basic structure is the minimum requirement for harmonic patterns.
It should be said that the range from 0.382 to 0.886 includes all Fibonacci corrections in this range for point C. Based on the cross ratios mentioned in the table above, this ratio is consistent with the BC estimate which can be either 1.13, 1.27, 1.41, 1.618, 2.0, 2.24, or 2.618. In some rare cases, 3.14 estimation can also be used.
AB=CD bearish retracement pattern should have distinct symmetry with pattern completion point in BC estimate and possible retracement range.
Again, it is emphasized that the range of 0.382 to 0.886 Fibonacci retracement is the range for point C, which can include any of the harmonic trading ratios between these two numbers. Based on the defined interrelationships, the ratio for BC estimation can be 1.13, 1.27, 1.41, 1.618, 2.0, 2.24 or 2.618. In some rare cases, the estimate of 3.14 can be used.
Since the AB=CD pattern is the basic framework of all harmonic patterns, it should be taken into account when defining the possible return range. Substitution patterns are an effective tool to supplement other important Fibonacci calculations, especially when the equation AB=CD is not correlated with specific harmonic structures. The alternative pattern AB=CD also shows similar structures.
The AB=CD bullish retracement alternative pattern usually shows patterns similar to the bullish crab pattern and the bullish butterfly pattern in markets where we are experiencing extensive selling. However, the alternative pattern AB=CD is only a complementary calculation to other Fibonacci numbers in the range of possible returns. In addition, AB=CD equivalent patterns usually have a much more reflective completion point than alternative structures. The AB=CD pattern with 1.618 expansion is usually relatively less used compared to other AB=CD combinations. Despite the differences, when correctly applied to the harmonic pattern of any AB=CD calculation, it can define an accurate return range and be an effective tool for calculating price structure.
It should be emphasized that the AB=CD pattern is the basis of all harmonic structures, regardless of whether the patterns are equivalent or alternate. In most cases, the AB=CD pattern is the minimum condition required to enter the trade. When combined with other important Fibonacci retracements and Fibonacci estimates, the AB=CD pattern can define a good retracement range.
Other alternative variants of the AB=CD pattern are usually found in patterns that have a longer CD extended wave. Unlike Gartley, which uses AB=CD equivalents, the Bat structure typically experiences an alternative AB=CD 1.27 pattern. These two similar patterns require different AB=CD conditions to confirm their structure. However, this degree of variation improves the accuracy of pattern recognition techniques and lowers the overall risk in defining accurate regression ranges.
The complete AB=CD pattern is defined by point C, which must be exactly equal to the 0.618% correction of wave AB. The correction point of 0.618% C leads to the expansion of BC by 1.618%. Although the 1.618% extension usually indicates an extended Fibonacci range, it usually brings strong reactions, especially in the full AB=CD pattern.
These structures usually have relative symmetry and have the most ideal geometric structure. The ratios 0.618 and 1.618 represent the most complete AB=CD pattern among the harmonic ratios derived directly from the Fibonacci sequence. Another aspect of the complete AB=CD pattern is that of overall timing. In fact, each wave should spend exactly the same amount of time. Although an exact duration is not required, each part of the pattern must be individually symmetrical.
Complete bearish reversal pattern AB=CD SakhIt is a distinct warp that requires precise Fibonacci levels. The completion point of the AB=CD pattern should be the highest figure in the possible return range and conform to the BC estimate of 1.618%. Point C should be exactly the 0.618% correction that also produces the 1.618% cross estimate of BC. The full bearish AB=CD pattern is a harmonic structure that usually occurs on intraday (sub-daily) charts.
Although the initial structure of AB=CD may contain different Fibonacci ratios, the concept of support or resistance at the completion point of two distinct and consecutive price waves is the most important issue in all harmonic patterns.
The alternative AB=CD patterns emphasize the importance of using elementary structure in defining specific harmonic patterns. In AB=CD, completion of estimate BC should be the range of completion of pattern. It should be remembered that the mutual relations of point C to the extension of BC are very important. The complete AB=CD pattern uses a correction of 0.618% and an estimate of 1.618%, because these two ratios are the most symmetrical and important Fibonacci ratios in harmonic patterns. This pattern should have certain characteristics to confirm the harmonic structure and provide trading opportunities to the investor:
The minimum completion range of the AB=CD pattern is where the size of each price wave (size of AB and CD) is equal.
Retracement C can be a Fibonacci ratio from 0.382 to 0.886, although a retracement of 0.618 is the most desirable ratio.
The estimated BC can be a ratio between 1.13 and 3.618 and depends on the correction point C.
There are also alternative patterns AB=CD.
It should be said that in recent years, many Fibonacci style analysts have simplified this pattern. It would be foolish to enter a trade with any AB=CD pattern. Most of the people who make this structure look very big, do not have a correct understanding of AB=CD conditions to confirm the completion of the pattern. This harmonic structure should include Fibonacci corrections or Fibonacci approximations. However, the most important principle to remember is that the AB=CD pattern is the basic structure for all harmonic patterns.