Tuesday, May 20, 2014

Trading The Symmetrical ABCD Pattern; SchoolOfTrade.com

In today’s day trading tutorial we are going to discuss The Symmetrical AB=CD Pattern, which is one of the easiest, and most reliable day trading patterns you can find on any chart around the world.

Professional traders have been using Symmetrical AB=CD Pattern for over a century to find high percentage day trading opportunities on any liquid market they chose and any time-frame needed.

day trading ABCD PATTERN
Day Trading  the AB=CD PATTERN

There are many ways to trade the Symmetrical AB=CD Pattern, but only one (1) way is considered the highest-percentage way to use it on any Futures, FOREX, or Stock Market.

5 simple steps to trade the Symmetrical AB=CD Pattern:

Step 1:  Find a support level on your anchor chart
The first thing we need is to find a location on our chart where we expect traders to react and a price-reversal to occur.

We like to use Fibonacci retracement levels, trend-lines, reversal-lines, Open, High, Low, and close levels on our anchor chart for the best opportunities.

Any major level of support will work, so find that first on your anchor chart.

Step 2:  Find the “A, B, and C points” of the Symmetrical AB=CD Pattern
After we find the major support level on the anchor chart, we then need to find the first leg of the Symmetrical AB=CD Pattern, which is the ‘A’ to ‘B’, and then a retracement back to ‘C’.

The MOST important part of this step is that the retracement that occurs at ‘C’ must retrace at least 38.2% of the distance from ‘A’ to ‘B’, and should NOT move more than 88.6% of ‘A’ to ‘B’.

We use a simple Fibonacci retracement tool in Ninja Trader (hot key is F8) to measure the move from ‘A’ down to ‘B’, and then look for the ‘C’ to move the minimum of 38.2%.

Step 3:  Define the ‘D’ point on your chart, and look for the entry
After we find the ‘C’ point on our chart, now we want to project the same distance made from ‘A’ to ‘B’ down from the ‘C’ point to create the final point on the chart, which is called ‘D’.

This is very easy to do.  We use Ninja Trader to draw a line from ‘A’ to ‘B’, and then we move that line to the ‘C’ point and project where ‘D’ will be on the chart.

Remember, the ‘D’ point must be at LEAST to the major support level on the anchor chart.  It may exceed that support level, but it should NOT be less than the level of support.  We need to make sure ‘D’ is a complete ‘test’ of the support level on the anchor chart.

The MOST important thing to know about the ‘D’ point is that is must line up with the major support level you found on the anchor chart from Step 1.  This creates a rock-solid level of support and gives us an excellent opportunity to trade the reversal.

Step 4:  Entry is triggered at the ‘D’ point on the chart
We must wait for price to come down and test the ‘D’ point on the chart, which should also line up with the major support level from the anchor chart.

Its very important to see a TRUE TEST of this price level.  Close is NOT enough, it must really test that support level before you trigger the entry.

We look for a ‘true test’ of the ‘D’ support level, and then we place our entry to get LONG 1 tick above the close of the bar that tested the ‘D’ point.

Entry is triggered LONG 2-ticks above the highs of the bar that tested the ‘D’ point of the pattern.

Step 5:  Place your Stop-loss and Profit-targets
Once we enter the trade, we will use Ninja Trader’s ATM-Strategy tool to place our stop-loss and profit-targets on the chart with ease.

Our stop-loss will be 2-ticks below the lowest point of the ‘D’ level.

Our profit-targets will be placed in 3 areas, using the Symmetrical AB=CD Pattern as our guide.

·        Profit-target #1 = Trend-line drawn from point ‘A’ to ‘C’
·        Profit-target #2 = Swing-high level at point ‘C’
·        Profit-target #3 = Swing-high level at point ‘A’
·        Lock in profits by trailing your stop-loss below the ‘C’ point as you approach your profit-target #3.

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