The
Butterfly Pattern
The general extension structure of the
Butterfly pattern was discovered by Bryce Gilmore. However, the
exact alignment of ratios was defined in Scott Carney's 1998 book, "The
Harmonic Trader." This has become the industry
standard for the structure. Scott's ideal Butterfly Pattern requires
specific Fibonacci ratios to validate the structure. These
measurements include a mandatory 0.786 retracement of the XA leg at
the B point, which defines a more precise Potential Reversal Zone (PRZ)
and more significant trading opportunities. Also, the
Butterfly pattern must include an AB=CD pattern to be a valid
signal. Frequently, the AB=CD pattern will possess an extended CD
leg that is 1.27 or 1.618 of the AB leg. Although this is an
important requirement for a valid trade signal, the most critical
number in the pattern is the 1.27 XA leg. The XA calculation
is usually complemented by an extreme (2.00, 2.24, 2.618) BC
projection. These numbers create a specific Potential Reversal Zone
(PRZ) that can yield powerful reversals, especially when the pattern
is in all-time (new highs/new lows) price levels.
Raymond Chien:
i am going to call you my MASTER! lol
I am new to these price pattern trading strategy, would really like to learn. is it possible that you can show a few pictures of this butterfly pattern in the current markets??
Hi,
https://www.mql5.com/en/charts/3958646/audusdf-h1-fort-financial-services-au-emerging-butterfly
