ABCD
The ABCD pattern is an indicator that identifies three consecutive price swings. This pattern can be recognized in a shape of a lightning bolt. This pattern is unique because the difference between the swing either of low is the same distance. The Fibonacci retracement indicator is good tool to help measure the ideal AB=CD ratio.
A desirable ABCD pattern should retrace either .618%, or .786% Fib. The length as shown in the chart of B-C should be 1.27 or 1.618 Fibonacci. However, a .618% Fib retracement at Point C should result in a 1.618 distance, and .786 Fib should result in 1.27.
A profit target can be made about half or two thirds of the AB=CD move, and the stop loss can be placed under the completion of D.
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In the above example, the GBP/USD retraced to the profit target. This validated the AB=CD move to be bullish.
Butterfly Pattern
The butterfly pattern is a reversal pattern that focuses on new lows or highs. This pattern can either be bullish or bearish not only depending on price action, but the trend. Entry can be seen when the pattern has reached point D (the end) which gives confirmation of the reversal. A stop should be placed under or above the reversal area. A profit target can be put at half or two thirds of the butterfly move.
The most critical pattern is the XA leg to point B as it defines a crucial point called the Potential reversal Zone. This validates price reversing, which can confirm a trade signal. Further, the XA leg determines the calculation of B-C which is also a validation of a reversal. The ABCD pattern as shown in the chart gives confirmation of the butterfly.
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In the above example of a bearish butterfly for the EUR/USD, it hit our profit target validating the pattern and reversal.
Gartley Pattern
This is leading indicator that is illustrated through four consecutive price swings that are in a shape of a W. The start of the pattern is started from either a low or high that is called X. By defining X you can pinpoint A, B, C, and D. Unlike the butterfly pattern, the gartley is used to help identify opportunities, not a reversal in price action.
The most crucial point of the Gartley pattern is point B. The reason for this is because it defines the most reliable reversal, which is an opportunity. Point B must be at .618 Fib which can be seen from the XA leg.
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3 Drive Pattern
The three drive pattern is a harmonic pattern that is derived from the Elliot wave theory. It is unique as it does not contain X,A ,B, C or D, but instead 3 tops, or bottoms. These three price legs (alike the ABCD) signals the trend direction. These legs are considered to be the drives of the trend, and consist of Fibonacci ratios (1.13 1.27 or 1.618) that show equal movement in prices. These ratios can be seen inside at either the swing high or swings lows.
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