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Our team of analysts uses these popular Fibonacci patterns to identify trend continuations and reversals, as well as find potential market entry and exit points. Click on each image below to read a description of each pattern and to learn how you can use it for discovering new trading opportunities.
You can view two groups of Fibonacci patterns, bearish (down) and bullish (up). Simply click on the name to switch between the two groups.
The bullish ABCD Pattern
What is it?
- A leading indicator that may help determine where and when to enter a long position, or exit a sell position
- A visual, geometric price/time pattern comprised of three consecutive price swings, or trends—it resembles a lightning bolt on a price chart
- Reflects the common, rhythmic style in which the market often moves
Why is it important?
- Helps identify buying opportunities in nearly any market for almost any timeframe
- All other bullish Fibonacci patterns are based on (include) the bullish ABCD pattern
- Highest-probability trade entry may be at the completion of the pattern (buy at point D)
- Retracement followed by an extension suggests a higher probability for another retracement to occur
- Helps to determine risk vs. reward prior to placing a trade
- May provide a stronger trade signal when it converges with other patterns — within the same timeframe or across multiple timeframes
Sounds good... So how do I find it?
Each turning point (A, B, C, and D) represents a significant high or significant low on a price chart. These points define three consecutive price swings, or trends, which make up each of the three pattern “legs.” These are referred to as the AB leg, the BC leg, and the CD leg.
Source: GFT
Trading is not an exact science, so really there are three different types of ABCD buy patterns. There are key Fibonacci ratio relationships to look for in the proportions between AB and CD, offering an approximate range of where and when the ABCD pattern may complete. This is why converging patterns help increase probabilities and allow traders to more accurately determine entries and exits.
The bullish ABCD Pattern Rules
- Point A is a significant high, and point B is a significant low. In the move from A to B there can be no highs above point A, and no lows below B
- Point C must be lower than point A. In the move from B to C there can be no lows below point B, and no highs above point C
- Ideally, point C will be 61.8% or 78.6% of AB (“Classic” ABCD pattern)
- In strongly trending markets, BC may only be 38.2% or 50% of AB
- Point D must be lower than point B (market successfully achieves a new low). In the move from C to D there can be no highs above point C, and no lows below point D
- CD may equal AB (AB=CD pattern)
- CD may be 127.2% or 161.8% of BC (“Classic” ABCD pattern)
- CD may be 127.2% or 161.8% of AB (ABCD Extension pattern)
- There may be additional confirmation when the time of CD is in ratio/proportion to AB
- CD may equal AB in time, or CD may be between 61.8%-161.8% time of AB
- Watch for price gaps and/or wide-ranging bars in the CD leg, especially as market approaches point D
- These may be signs of a potential strongly trending market. In this case, a 127.2% or 161.8% ABCD extension pattern is more likely to occur.
Example 1: USD/CHF, 30 min
Source: GFT
Example 2: EUR/CHF, 15 min
Source: GFT
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