Understanding a Few Important Issues with Harmonic Patterns

Are you conversant with different trading patterns? If you know about a few trading patterns, you may be aware of the harmonic patterns or harmonic trading. It is an approach to trading the markets. As with most traders, you may be allured by the trading approach, as it enables you to predict turning points in the market. You would have a good risk to reward ration and draw beautiful patterns suitable for your specific needs.

However, you may come across a few trading problems in harmonic trading. Let us delve into them.

• Subjective harmonic trading

Do you consider trading as a business and not a hobby? Consider looking for a plan for everything. It would be pertinent not to make subjective decisions, as it would hamper your thought process. The foremost problem faced with harmonics trading would be subjectivity. Drawing harmonic patterns need you to identify the impulse leg. Rest assured that it is essential for all harmonic patterns. It would be for the trader to decide.

What would you do? A possible solution would be to consider choosing the impulse leg coinciding with resistance or structural support. Due to more confluence, you would have a higher probability of your trade.

• Making the market look at your patterns

Rest assured that the market has repeated patterns. Therefore, the question to ponder upon would be how to develop your trading strategy. It would be pertinent to mention here that patterns could be in higher highs and lows, range-bound markets, and consolidation before breaking. Therefore, to trade profitably, you should be confident of your trading strategy for extracting an edge in the markets. The trading strategy would be required to make sense to me before you use it.

• Missing on big trends

You may be looking forward to capturing big moves in the market at the cost of a lower winning percentage. However, harmonic patterns would be more prominent in range markets because of the way it is created. It would cause the traders to miss the chance in trending markets. Moreover, harmonic patterns would appear in trending markets against the trend. When you trade harmonic patterns in such a situation, you would find yourself losing the trades several times. With the harmonic trading performing poorly in the trending markets, it would be in your best interest to avoid trading harmonic patterns in the trending market.

• The range markets

A range market would entail the price contained between resistance and support. It would not be wrong to suggest that the range market would work in the favor of harmonics trading, as the patterns are more prevalent in the market condition. There may be situations whereby the harmonic patterns may not be present in a range market. It would cause you to miss trading opportunities.

• Stop-loss hunted

When you attend trading courses or read trading books, you would learn to place your stops below the support or above the resistance. It would help you find stops below the low of candlewicks and high of candlewicks.

As a trader, you should be aware of the pros and cons of trading and apply proper risk management.

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Created on Dec 9th 2020 00:33. Viewed 198 times.

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