What is it?
• A leading indicator that may help determine where and when to enter a short (sell)
position or exit a long (buy) position
• A visual, geometric price/time pattern comprised of three consecutive price swings,
or trends—it resembles a lightning bolt on price chart
• Reflects the common, rhythmic style in which the market often moves
Why is it important?
• Helps identify selling opportunities in nearly any market for almost any timeframe (intraday,
swing, position)
• Serves as a basis for all other bearish Fibonacci patterns
• Highest-probability trade entry may be at the completion of the pattern (potential sell 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 (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.
Trading is not an exact science, so really there are three different types of ABCD sell 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.
Trading is not an exact science, so really there are three different types of ABCD sell 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.
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