Trade execution and Profit Target

+ Execution in the PRZ: There are 3 ways to execute the trade

a) Execute on the first candle testing the PRZ: This technique requires intensive focus on that candle to see whether the candle is more likely to cut through that PRZ. The advantage of this technique is that you will less likely to miss a trade. However, it requires a lot of time, effort and experience to recognize if the PRZ can hold off this first candle.
b) The other way is to wait for the price to be rejected out of the PRZ and execute on the retest. This way, we can have confirmation that the PRZ has held off the trend. However, there might not be a retest and we might miss the trade.
c) Place pending order in advance at the level of the most important element in the PRZ (example: 0.886 retracement for the Bat and AB=CD for the Gartley)

1. Bat and Gartley pattern

+ Execution in the PRZ: We usually use the second way in our trading plan for Bat and Gartley but it’s up to you 🙂 Sometimes we use the first way, depending on how clearly the price reacts to the PRZ on the first test.

Take a look at this Gartley pattern here in which we used the second way of execution in the PRZ. Bat pattern can be handled in the same way
EURJPYH1

The Price get rejected from the PRZ, so we will sell on the retest.
EURJPYH1-3

** We strongly recommend against the third way of execution for Bat and Gartley. There are so many times when price just cuts through the PRZ and we make a loss “without a fight”.

+ Entry: “Sell at the top or don’t sell. Buy at the bottom or don’t buy”. Harmonic traders need to heed this advice. We only execute the trade at the top/bottom (for sell/buy order) of the PRZ or outside the PRZ where we can buy lower or sell higher. There is a huge advantage executing at that level which will be discussed later
+ Stop loss: Above X for sell order and below X for buy order. (Look at the second image above)
+ Target: It really depends on the structure in the market at the time. However, normally we would set Target 1 at 38.2% retracement of AD and Target 2 at 61.8% retracement of AD. ( Look at the example below)

EURJPYH1-3

EURJPYH1-4

2. Butterfly

Execution: We use the third way as price usually gets rejected the second it touches 1.272 XA projection or finishes testing the PRZ.
Entry: at 1.272 XA projection or slightly above for sell and below for buy order.
Stoploss: right below/above 1.414 XA projection for buy/sell order
Target: Target 1 can be 38.2% AD retracement – Target 2 can be 61.8% AD retracement. It’s just recommendation and subject to change according to structure of the price at the time executing the trade.

3. Shark pattern

Execution: We use the first or third way as price often gets rejected when it finishes testing the PRZ and a retest is not common. However we might have 2 PRZ as shown in the last example of article about Shark. In that case, we would recommend to commit half of position to trade the first PRZ and half for the second.

Gold Daily chart
Gold Daily chart

Entry: at the extreme level of the PRZ (remember to adjust for spread).
Stoploss: right below/above 1.272 0X projection for buy/sell order.
Target: Target 1 can be 38.2% BC retracement – Target 2 can be 61.8% BC retracement. It’s just recommendation and subject to change according to structure of the price at the time executing the trade.

4. Crab and Deep Crab

+ Execution in the PRZ: We usually use the second way in our trading plan for Crab and Deep Crab but it’s up to you 🙂 Sometimes we use the first way, depending on how clearly the price reacts to the PRZ on the first test.

+ Entry: “Sell at the top or don’t sell. Buy at the bottom or don’t buy”. We only execute the trade at the top/bottom (for sell/buy order) of the PRZ or outside the PRZ where we can buy lower or sell higher. There is a huge advantage executing at that level which will be discussed later
+ Stop loss: For Crab and Deep crab, it’s hard to tell exactly where we should put the stop level. The general idea should be using the structure of the market (look left for nearby support and resistance). If you can’t find any, you can definitely go ahead and put the stop loss at a reasonable distance from the PRZ, leaving room for the market to breath. Keep in mind that don’t risk an amount larger than the reward from Target 1.
+ Target: It really depends on the structure in the market at the time. However, normally we would set Target 1 at 38.2% retracement of AD and Target 2 at 61.8% retracement of AD.

5. Cypher

+ Execution in the PRZ: We usually use the first way in our trading plan for Cypher pattern. Sometimes we use the third way, depending on how calm the market is.
We strongly recommend against the second way in trading Cypher pattern as a retest at 0.786 XC retracement often means failure of the pattern.

+ Entry: at 0.786 XC retracement or slightly above/below where we have more advantage
+ Stop loss: Above X for sell order and below X for buy order. When price starts to fall, we need to trail the stop or move it to break-even. Bear in mind that a retest of 0.786XC often means a failure!
+ Target: normally we would set Target 1 at 38.2% retracement of CD and Target 2 at 61.8% retracement of CD.

This article is just a guideline for Harmonic trading. You are encouraged to choose whichever method you want and contribute it to the Harmonic trading community. If you still need more examples, don’t forget that we have a live-trade collection and archives of Harmonic pattern here. You now have learnt one of the most powerful technique in Technical Analysis. It’s time to make money 🙂

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