We study the features of the formation and construction of strategies for the popular pattern “Crab”
Starting to engage in trading, you need to understand that you are faced with a probabilistic process. And if they advertise a trading system that in the past issued 80-90% of profitable transactions, then it is not at all necessary what will happen in the future. The market is constantly changing, one life stage of the trend replaces another, and counting on the performance of previously effective strategies is the same as buying a pig in a poke. You do not understand how this works but sincerely hope that the purchase will bring you money. In my opinion, the only right approach is to choose a trading system that is close to you, to understand it in detail, to adjust for yourself and learn to accept losses.
A typical example of a trader’s adaptation to a changing market is harmonious trading, which we began to study in previous materials. The main objective of this area of technical analysis is the identification of a reversal using patterns and Fibonacci ratios with a high probability. However, whatever the odds, there is always a risk that the model will not work. The convergence zone can be covered quite easily, resulting in losses. Is it worth it to despair? In no case! Firstly, in order to consistently make money, you must first learn how to lose them. Secondly, in trading, as in life, you need to be optimistic. If you have any difficulties, you should take them as new opportunities.. For example, if after reaching the target by 88.6% according to the “Bat” pattern, the quotes of the currency pair continue to go down, we can talk about transforming the graphic configuration into the “Crab” model. The correction levels for it are 38.2-61.8%, and the target is significantly lower. At the level of 161.8% of the XA wave.
Pattern transformation took place on the 4-hour AUD / USD chart. Theoretically, after reaching a target of 88.6% for “Bat” and the formation of a reversal pattern “Head and shoulders” in the area of convergence, an emphasis should be placed on purchases. However, the Australian dollar stubbornly did not want to go north, and its inability to gain a foothold above the level of 0.7572 became evidence of the weakness of the bulls.
The hint was provided by a combination of the Three Indians and Anti-Turtles patterns. They signaled the depletion of corrective movement and the high likelihood of continued peak. A trader familiar with harmonious trading patterns might have suggested that the Crab pattern is about to become active.
“ Three Indians ” are good in that they allow you to use various methods of entering a position that is suitable for both aggressive and conservative traders. In the case of AUD / USD, there was some doubt for some time, so it would hardly be possible to enter too long. Another thing is a breakthrough to the lower boundary of the short-term trading channel. A protective stop order should be set at the correction maximum level. As for the target, a hint about its location, as usual, gives a harmonious trade. If you are trading the “Crab” pattern, then you need to get used to the figure of 161.8%.
If the trader still has doubts, then it’s time to turn to confirm signals or so-called filters. In their quality indicators can be used. In particular, the divergence on MACD would allow entering AUD / USD sales with more confidence.
Thus, you should never despair. Think of your problems as new opportunities and enjoy trading.