Quick Tutorial on how to use the AB=CD Harmonic pattern excel calculator.
You start by looking for ABC structures, where C is at minimum a 38.2% retrace of AB (I use 35% most of the time to allow some wiggle room). A point C is qualified as follows:
in case of a CD leg down (which results in a bullish PRZ) :
- point C is a high surrounded on either side by at least one lower high.
in case of a CD leg up (which results in a bearish PRZ) :
- point C is a low surrounded on either side by at least one higher low.
Once you eyeball your charts and you think you have something that adheres to these rules you plug in the numbers into the calculator, and it’ll calculate the corresponding PRZ zone.
Today SPY 2min chart with a Point A at 12:40, a Point B at 13:38, and a probable Point C at 14:32
You see that point C is at least 38.2% retrace of AB (the calculator won’t calculate if you plug in a value that’s not a 38.2%retrace), and it is surrounded by lower highs.
Pull out your calculator and enter:
A : 208.94
and click “calculate”
The PRZ is calculated starting at 207.55 with an entry at 208.25
with D (the exact range of AB subtracted from C high) at 207.54, and a final level at 207.27
chart at End of Day :
Right after the close traded into the zone.
the “entry” is not necessarily a signal to go short or long, it merely shows that a CD leg is a probability, and you should use some other indicators, like a volume/price based oscillator to confirm a setup (or whatever indicator you prefer).
Then at the PRZ (Potential Reversal Zone) you can look for a reversal trade.
Personally I like to take PRZ reversal trades of small Timeframes into the direction of a CD leg on a higher TimeFrame.
The calculator only calculates AB=CD patterns, not XABCD.
Members get the calculator for free by applying a discount coupon.