Here's a video on how to identify Harmonic Butterfly Patterns. This runs through the pattern recognition process, trade setup and trade management for all conventional Harmonic Butterfly Patterns. OTSoftware identifies all Advanced and Harmonic Patterns automatically and objectively.It also enables you to create up to three of your own patterns. This has changed my trading success dramatically and maximised profitability.
Once the X and A points have been identified the B point is formed by inputting a precise 78.6% retracement of the XA leg. Therefore, B must be must be 1 pip more than 70.2% (halfway between 61.8% and 78.6%) and 1 pip less than 83.6 (halfway between 78.6% & 88.6%).
The C point is valid if it touches at least a 38.2% retracement of the AB and it does not exceed the A point (100% AB).
The Potential Reversal Zone (PRZ) is calculated as a combination of the 127.2% extension of the XA leg, 127.2AB=CD movement level (so the same distance as 127.2% of the A-B leg but this should be copied across and measured from the C point) and finally, the corresponding BC extensions:
224.0% of the BC if the C-point is precise 38.2% of the AB,
224.0% of the BC if the C-point is precise 50%% of the AB,
200.0% of the BC if the C-point is precise 61.8% of the AB,
200.0% of the BC if the C-point is precise 70.7% of the AB,
1.618% of the BC if the C-point is precise 78.6% of the AB,
1.618% of the BC if the C-point is precise 88.6% of the AB.
None of the levels should extend past 141.4% extension of the XA
Harmonic Butterfly Target 1: 38.2% retracement of the AD leg.
Harmonic Butterfly Target 2: 61.8% retracement of the AD leg.
Harmonic Butterfly Stops: My personal preference is 161.8% XA however, the conventional level is at 141.4% XA.
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