Harmonic Patterns: The Bullish and Bearish Cypher Patterns

The bullish and the bearish cypher harmonic pattern is a little bit different from the other harmonic pattern. This harmonic chart pattern is mostly used by commodities trader. The reason behind the trending popularity of this pair is the huge number of traders in “gold and oil.” Traders are using this pattern as continuation pattern in the forex industry. This pattern can also be traded in the currency market once a valid trend is present.

Let’s see an example of the Bullish and the bearish Cypher harmonic pattern:


Figure: The bullish and the bearish cypher harmonic pattern.

A professional trader can either utilize a custom indicator or can draw this harmonic pattern effortlessly by computing the retracement level of the trending wave. Many traders use indicator in order to avoid error during drawing this pattern correctly. “The best thing about this harmonic indicator, it’s totally free!”

Trade setup

A trader takes a buy or sell entry at the point D depending on the formation of the chart pattern. Some trader use price action confirmation in order to make the setup more reliable and efficient. The stop loss is generally placed just below the point D for bullish confirmation and for Bearish Cypher pattern the stop loss is set just above the point D.

Traders can also use previous support and resistance level for determining their stop loss and take profit level. Most professional traders don’t use a fixed take profit area rather they prefer “trailing stop loss” while trading “the bearish and the bullish cypher harmonic pattern.”

Some advanced price action traders use these harmonic patterns to identify the corrective waves of a trend. Corrective waves are those waves which are generally formed after a long existing trend in the market. “But trading with harmonic indicator associated with corrective wave require extensive skill about Elliot wave theory”.

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