Trade Setup
The X-A leg is generated by an initial price swing in one direction.
The market forms the B if it touches at least a 38.2% retracement of the XA and the close price does not touch a 61.8% retracement of the XA. Therefore, the candle wick can exceed the 61.8% retracement however, the candle must not close beyond it.
The market forms the C if it touches at least a 127.2% extension of XA and the close price does not touch the 141.4% extension of XA. Therefore, the candle wick can exceed the 141.4% extension however, the candle must not close beyond it.
The Market forms the D (completion point) by fulfilling an 78.6% retracement of the XC.
Note: D must exceed the B point in order for the pattern to be valid.
Conventionally, limit orders are set at the D point with the expectation that price will reverse. If the order is triggered but price does not immediately reverse but rather continues in the direction of the C-D leg, targets should be adjusted accordingly. The Fibonacci retracement tool should be re-stretched from A to the new price extreme, D. Target 1 and Target 2 should be moved to these new levels.
If Target 1 one is hit, conventional rules state that half of the initial position should be closed and the stop loss for the remaining half should be placed at the original entry point (breakeven).
Cypher Target 1: 38.2% retracement of the AD leg.
Cypher Target 2: 61.8% retracement of the AD leg.
Cypher Stops: 113% extension of the XA
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