The ABCD pattern is another handy-dandy strategy which is an excellent indicator to understand the connection between time and prices. This strategy is a good helper for beginners and advanced traders since identifying trading opportunities in a few simple steps.
In this article I am going to describe in detail the use of this strategy, so you will find out:
- How to use ABCD strategy to make winning trades
- How to identify ABCD pattern on the chart
- How to spot right entry time.
ABCD strategy summary
First of all, in order to identify ABCD pattern, as always, you need to be hawk-eyed and get some easy-to-use chart tool.
The first step of this strategy is the correct assignment of each ABCD pattern letter to the relevant part of a directional trend. For the bullish and bearish version of the pattern, AB and CD lines are considered as the legs of ABCD pattern and BC in known as the retracement of correction. In the case of the bullish trend, the pattern will start from point A as the first valley, B will be the first peak, C will indicate as a second valley and D would refer to a second peak. In the bearish version of the trend, peaks will be swapped out with valleys and vice versa.
When you found your peaks and valleys, it's time to overlay the Fibonacci levels. In general, the basic idea of the strategy is an early detection of the trend reversal to identify possible trading opportunity.
For this trading guide, I ignored some advanced recommendations about ABCD strategy and used in a rather simple way. Here you can find more about three main strategies based on ABCD points and some pro advice. So time to go to the practice part of the guide.
The first trade was carried out with the GBP/USD currency pair. I identified ABCD pattern and overlaid the Fibonacci levels. We observe the bearish trend, so it is a good time to buy 'put' options. The option has to expire in 40 min, so according to my prediction based on ABCD pattern, the price will reduce during this time.
Fortunately, an option expired in the money, so ABCD indicator helped me make a correct prediction.
Another currency pair that has shown a suitable trend for ABCD pattern application was GBP/JPY. As we can see, the trend is bullish, so I bought 'call' option. It will expire in 30 min, and I expect that price will rise during this period.
ABCD strategy was applied in the right way and is helped me to earn $37.50 on this trade.
Next trade was taken with USD/JPY currency pair. I identified trading opportunity and applied the Fibonacci levels. It was a bullish trend, so I expected trend reversal and further price increase. But this time I bought 'call' option with 15 min expiration time. It is little bit short time for being sure in my prediction but took a risk.
As we see the investment paid off and I earned extra $37.50.
Looks like this time only currency pairs works well for me since my last trade was carried out with USD/CAD. This time wasn't different from other. I applied ABCD pattern overlaid the Fibonacci levels and bought 'put' option since the trend was bearish.
The result was as good as in previous times. The option expired in the money, and I put extra $37.50 to my pocket.
Well, the results speak for themselves. I made four trades, and four trades were winning and expired in the money. Of course, we should not underestimate the role of luck and intuition, but if you have knowledge and tools to help make the right decision, then even luck is on your side.
Please, let me know if this piece of a journal was useful for you. Also, if you want me to test some another strategy, feel free to contact me or just leave a comment below.