How to Trade the Cypher Harmonic Pattern Trading Strategy

This pattern consists of five points (X, A, B, C, and D) and is used to identify high-probability trade setups in the forex market. Traders enter long or short positions at point D, depending on the reversal direction. Once point B completes, prices resume the downward trajectory, taking out the swing low at point A. Our sell entry would occur upon the CD leg making a 78% retracement of this aforementioned X to C price move. The Cypher pattern is a reversal formation within the harmonic class of patterns. It occurs across various financial markets including forex, futures, stocks, and cryptos.

  • So, if you mainly trade in the lower time frame, don’t miss the chance to read the Best Stochastic Trading Strategy- Easy 6-Step Strategy.
  • The second leg of the pattern is called the AB leg which retraces a portion of the XA leg.
  • The trading method is largely attributed to Scott Carney, although others have contributed or found patterns and levels that enhance performance.
  • If you’re not a fan of reversal strategy, and you prefer a trend following strategy, follow the MACD trend following strategy-simple to learn another strategy.
  • Below you can see a side-by-side comparison of the cypher pattern and the shark pattern.

In many opinions, it is the most exciting harmonic pattern with a high success rate. To do so, you need to locate the X point automatically stretch the lines and create a zigzag pattern. DISCLAIMER – Your money is not in danger but guaranteed to disappear if you follow my trades. These ideas and trades are mostly for my personal use as a journal, but I try to provide as much value as possible to the community

Cypher patterns supposedly have 80% completion ratio.

Step 1 – Drawing The Cypher Pattern On Margex

Harmonics don’t play a huge role in my trading, but I still keep my eye out for a few select patterns that can get my into high probability reversal or continuation trades. Sharing this idea as a reference to my primary HTF view – the chart was going to be too messy otherwise. I don’t have much experience in trading harmonics at all, but often I keep an eye on them as they respect fibs levels I trade a lot. Also, maybe just a personal observation, but when i find it more difficult to trade, and it takes ages for the price to move…

Lately, this article has received a lot of attention from our readers. In the 17th century, the Japanese started applying technical analysis in the rice market. When I first discovered the Cypher Pattern, I was intrigued by its unique design and the precision with which it identified market reversals.

  • On the other hand, if the wick within the candlestick is of a relatively normal size, then I will opt to use the wick in the measuring process.
  • Let’s look at some examples of how harmonic price patterns are used to trade currencies in the forex market.
  • Point A and C will have higher highs in bullish Cypher and lower lows in bearish Cypher.
  • In the 17th century, the Japanese started applying technical analysis in the rice market.

If you’re not a fan of reversal strategy, and you prefer a trend following strategy, follow the MACD trend following strategy-simple to learn another strategy. The strategy has attracted a lot of interest from the Forex trading community. If you’re not a fan of reversal strategy, and you prefer a trend following strategy, follow the MACD trend following strategy-simple to learn another strategy.

EURCAD Intraday trade opportunity for Friday

The first is the Fibonacci retracement tool, and the second is the Fibonacci projection tool. Additionally, there are harmonic patterns indicators and software programs that can automatically recognize and label the cypher harmonic pattern on the price chart. The Cypher pattern is one of the lesser-known harmonic trading formations. But it is, nevertheless, a powerful trading pattern that you should learn and add to your trading toolkit.

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When you decide to trade, the secret to becoming successful is in reading patterns. Ensure you take profits once you reach point A of the pattern, because it has conservative take profit target. We can note the price only had a small deviation below the 0.786 Fibonacci ratio – our entry point. You need to follow this simple guide and see the figure below for a better understanding of the process. Before we get started, let’s review the indicators needed to successfully trade the Cypher Pattern Trading Strategy.

Cypher has less rules to follow compared to other harmonic patterns. Although its successful rate has nothing special compared to Gartley or Bat, the frequency of showing up and the ease of rules make this pattern become the favorite for all beginner traders. In a strong trending market, especially after the news, the cypher pattern becomes less reliable. The bigger the pattern (the longer it takes to form the pattern), the stronger the support/resistance it gives. The rules of the Cypher pattern trading strategy are pretty much straightforward.

The Cypher has a exceptionally high win rate, down to the fact that it rarely forms and reveals the big players want price to reverse. Given how well this example aligns with the ratios, you could decide to be more aggressive and set a profit target at C. You might also use the Trend-Based Fibonacci Extension tool, as we’ve used here, to find further targets, such as 127.2%.

Bearish Cypher Trade Example

For a bullish cypher pattern, place the stop loss a few distances below point X; for a bearish cypher pattern, place the stop loss a few distances above the X point. The use of ATR can be used to set stop loss to avoid stop hunting. The cyber harmonic chart pattern has the same pattern and structure as other harmonic patterns like Gartley, Bat, and Butterfly patterns. The cypher chart pattern can be either bullish or bearish and comprises four separate price legs that relate to Fibonacci ratios.

Therefore, as with all trading strategies, risk must be controlled. That is to say that if the wick within the candlestick appears inordinately large, then I typically opt to use the candle close for measuring the specific point. On the other hand, if the wick within the candlestick is of a relatively normal size, then I will opt to use the wick in the measuring process. If the ratios line up, enter a long trade once the right bullish price action appears below the 78.6% level but not beyond the 100% level – a breach past here invalidates the pattern. Like most harmonics, the Cypher isn’t exactly easy to identify, at least without using indicators. Like other harmonic patterns, the Cypher requires that specific Fibonacci ratios be met before it is traded.

At first, I was a bit hesitant, but after incorporating the Cypher Pattern into my trading routine, I quickly realized its potential to improve my trading results. The BC leg moves lower and takes out the swing low at point A, and terminates between the 127.2 and 141.4 projection of the initial XA leg. The BC leg moves higher and takes out the swing high at point A, and terminating between the 127.2 and 141.4 projection of the initial XA leg. Let’s now take a closer look at the characteristics of the bullish variety of Cypher pattern by referring to the image below. If you want to use a harmonic scanner which will draw a Cypher pattern automatically for you and send you notification then check the scanner on the link below. Scanner will give you notification when the patterns appears and it will show you all the levels.

If you refer to the price chart, you can see where that sell entry signal would have triggered. You will also notice that following the sell entry, the prices did continue to move cypher patterns slightly higher, before rejecting back down, and forming a shooting star candlestick. This further bolsters our level of confidence for a potential short trade opportunity.

The stoploss would be placed just below the swing low of point X. This level is marked on the price chart with the black dashed line below the entry point. After making a slightly lower price move following the entry point, the price began to rise quickly.

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Michelle Ot Ene

Coach Espiritual

Fundadora do Templo da Centelha Divina, Coach Afetivo Espiritual que visa compreender e equilibrar as energias femininas e masculinas, individualmente e nas relações conjugais.

Especialista em desenvolver programas personalizados para um estilo de vida integral e saudável.
Orientadora das Tradições Femininas, ajudando a mulher a alcançar êxito, flexibilidade, equilíbrio e rejuvenescimento.

Adquiriu sua formação profissional e conhecimento espiritual em diversas escolas em locais sagrados como: Índia, Egito, Machu Picchu, Grécia, Sibéria, Casaquistão e outros.