PZ Harmonic Trading Indicator-Harmonacci Patterns 11.6 – Point Zero Trading

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The Harmonacci Patterns indicator is arguably the most complete harmonic price formation auto-recognition indicator you can find for the MetaTrader Platform. It detects 19 different patterns, takes fibonacci projections as seriously as you do, displays the Potential Reversal Zone (PRZ) and finds suitable stop-loss and take-profit levels.

• It detects 19 different harmonic price formations
• It plots primary, derived and complementary fibonacci projections
• It evaluates past price action and displays every past pattern
• The indicator analyzes its own quality and performance
• It includes a multi-symbol and multi-timeframe scanner
• It displays suitable stop-loss and take-profit levels
• It uses breakouts to signal suitable trades
• It plots all the pattern ratios on the chart
• It implements email/sound/visual alerts

Inspired by Mr. Scott M. Carney’s book -Harmonic Trading Vol. 1-, this indicator has been designed to fulfill the needs of the most purist and exigent traders. However, it implements a twist to make it easier to trade: it waits for a donchian breakout in the right direction before signaling the trade, making its signals very reliable.

• Fibonacci projections are vector-independent
• It implements email/sound/push alerts
• It plots the ABCD projection

Usage Tips

• The amplitude parameter controls the pattern size in bars
• Load the scanner indicator once to monitor many symbols and timeframes
• Patterns can expand but signal breakouts mostly do not: wait for signals
• Avoid trading if higher timeframes display a strong trend against your trade
• Use the suitable SL and TP levels displayed by the indicator

Technical Information

• The indicator evaluates at bar closing only
• Patterns are displayed as soon as the XD and CD ratios are valid
• Patterns can expand, repaint and become other patterns, with different names
• Breakouts are mostly non repainting and enough to reverse the market movement
• Set a higher breakout period to decrease the odds of the indicator repainting
• Stop-loss and take-profit levels are calculated using fibo ratios
• The scanner loads blank, it never scans patterns to the past
• The scanner opens charts using your default chart template

Important: Some pattern names have been renamed to self-explanatory alternatives to comply with a trademark complaint from Mr. Scott M. Carney, who owns the following trademarks in the USA: Harmonics, Harmonic Trading, Bat Pattern, Butterfly Pattern, Shark Pattern, Crab Pattern and Five-O Pattern.

Supported Harmonic Price Formations

A brief introduction

The harmonacci methodology utilizes the recognition of specific price patterns and the alignment of exact Fibonacci ratios to determine highly probable reversal points in the financial markets. This methodology assumes that trading patterns or cycles, like many patterns and cycles in life, repeat themselves. The key is to identify these patterns, and to enter or to exit a position based upon a high degree of probability that the same historic price action will occur. Although these patterns are not 100% accurate, these situations have been historically proven. If these set-ups are identified correctly, it is possible to identify significant opportunities with a very limited risk.

The Potential Reversal Zone (PRZ)

The concept of the Potential Reversal Zone (PRZ) was originally outlined by Scott M. Carney in his book, Harmonic Trading Vol 1. A wholeheartedly recommended reading.

History has proven that a convergence of Fibonacci numbers and price patterns provides a highly probable area for a reversal. This area of convergence is called the potential reversal zone. When three, four, or even five numbers come together within a specific area, you must respect the high probability for some type of reversal.

A Potential Reversal Zone (PRZ) represents the critical areas where the flow of buying and selling is potentially changing. These fibonacci price zones attempt to identify the price levels where imbalanced overbought and oversold situations are reversing back to their respective equilibrium level.

An ideal reversal usually tests all of the price levels in the Potential Reversal Zone (PRZ) on the initial test. The predominant trend usually reverses from this initial test of the entire PRZ and continues in the reversal direction shortly thereafter. In an ideal reversal, the price bar that tests all of the fibonacci projections in the PRZ is called the Terminal Price Bar.

The trade must be taken when the Potential Reversal Zone (PRZ) has been tested and rejected by a Terminal Price Bar or a strong breakout has taken place in the reversal direction without testing all the PRZ levels. The farthest price level of the PRZ or the Point X of the pattern are suitable stop-loss levels.

Harmonacci Ratios

The indicator calculates all the important fibonacci ratios for the XA and BC vectors of the pattern, and plots them by the Point D if applicable.

Primary Ratios

Directly derived from the Fibonnaci Number Sequence.

• – 0.618 = Primary Ratio
• – 1.618 = Primary Projection

Primary Derived Ratios

• – 0.786 = Square root of 0.618
• – 0.886 = Fourth roof of 0.618 or Square root of 0.786
• – 1.130 = Fourth root of 1.618 or Square root of 1.27
• – 1.270 = Square root of 1.618

Complementary Derived Ratios

• – 0.382 = (1 – 0.618) or 0.618e2
• – 0.500 = 0.770e2
• – 0.707 = Square root of 0.50
• – 1.410 = Square root of 2.0
• – 2.000 = 1 + 1
• – 2.240 = Square root of 5
• – 2.618 = 1.618e2
• – 3.141 = Pi
• – 3.618 = 1 + 2.618

Trade Execution

Once a pattern is detected, the following steps have to be taken, which can lead to take or discard the trade. Bear in mind that a pattern is not valid by itself and it can expand as long as it likes. Your job has an trader is to assess the validity of the pattern and the potential reversal zone before entering the market.

1. Pattern Recognition

This indicator auto-detects and alerts harmonacci patterns.

2. Find the Potential Reversal Zone (PRZ)

Evaluate the fibonacci projections plotted on the chart by the indicator and look for strength signs. Can you find at least three converging projections? Do you see primary ratios? Is the ABCD projection present?

3. Wait until the PRZ is rejected by the market

The PRZ can be tested and rejected by one single Terminal Price Bar, or the market can reverse and breakout the PRZ without testing all the fibonacci projections. In any case, the market has to move before you take the trade. You are a follower, not a predictor.

4. Enter the market setting the proper stop-loss

Trade the breakout or the rejection of the PRZ and set the proper stop-loss. The farthest price level of the PRZ or the Point X of the pattern are suitable stop-loss levels.

5. Position Management

It is recommended to reap partial profits as soon as possible to lock into a free ride. Scott M. Carney proposes a very interesting position management system based on a 0.382 Trailing Stop, measured from the reversal point to the reversal extreme.

The Potential Reversal Zone (PRZ) is a crucial element in the trading process. Hence the importance of vector-independent primary, derived and complementary fibonacci projections, which all other indicators ignore completely.