Took a loss on this trade although it looked good for a little while. This is a good lesson on the dangers of trading a POTENTIAL harmonic pattern. Although many times, it can be quite profitable to trade the POTENTIAL completion of a harmonic pattern (i.e. trading the CD leg), it is also more risky than trading a COMPLETED pattern.
As I've said before, when trading the CD leg, you ARE NOT trading any pattern per se because the pattern doesn't actually exist yet. So for those that want to point out and say, "See? Advanced patterns don't work!", to you guys, I just want to point that out. And for those that want to trade advanced patterns, this is a good case example about the risks of trading on the CD leg completion. I do it. So do many others who trad advanced patterns. But as long as you know the risks involved and manage your stop losses well, it's a worthwhile risk.
Since one of the reasons I take the time to post my trades here on Tradingview is to hopefully help fellow traders in learning about trading, I will also breakdown some of my losses as well and not only keep showing my wins. I don't want ANYONE to get the idea that I only win! I don't. NOBODY does! But the trick is to manage the losses.
ANATOMY OF THIS TRADE LOSS
So in this case, I traded upon the CD leg BUT in reeality, it was much more of a structure trade than anything else. I set my BUY at any close above the B point line which is representative of a structure. Prices close above that B point and I took a BUY order @1.32585 (close of the first bar to close above the B point line). I then set my stop loss @1.32220 (the low of the small channel consolidation below the B point line). Prices then proceeded up along the CD leg as predicted and even closed above the PROPER B point line (the B point of the crab) which indicated a good probability that the pattern would complete. But remember, it is ONLY a probability and not a sure thing that it will complete! So at that point, the trade was looking very good and was in the "profit" (paper profit as until the trade is closed, it is not real profit) by +68 pips. But then it hit the minor sr structure level I had marked on the chart and started major reversal.
So this being an actual STRUCTURE trade and not so much a CD leg pattern trade, I should've closed the trade at that point but I did not because there was a close above the B point of the crab. So I ended up taking a loss on this trade of -37 pips when prices came all the way down and hit my stops.
so, you are human after all EverythingForex (jk)...One thing is certain in the trading world, all these patterns and moves are never certain- otherwise everyone would be making money- only probabilities.
EverythingForex
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Yep. I'm not one of those "trading robots". No one can win all the time. Not with any system. Can only try to win more than losing to make money.
nabz19601960
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thanks a new good lesson learned, P & L comes hand in hand, thanks for sharing
ygautama24
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good lesson for me because i follow this pattern too. U said that the crab pattern is only a possibility. could i say that, if the price hit D of crab pattern, so we can make sure that the crab pattern is valid and it will go bearish from D ? Or, once again, is it just a possibility?
anyway, i found the web which can (possibly) examine the harmonic pattern at http//formationseeker.com
EverythingForex
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At this point, the crab pattern is no longer valid as prices have reversed down and closed below that X point of the crab. So there is not any pattern there. Potential or otherwise. But if your question was if prices did reach the D point, does that make the pattern valid? Yes, of course. When prices reach the D point of any pattern, then that pattern is considered COMPLETED and to look for a reversal coming. Sometimes it will reverse right away (rarely), sometimes prices will test the PRZ of the pattern before reversing.
Thanks for the link but I don't need any program to examine patterns for me. Maybe it can help others though.
fxnoob1985
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I was monitoring this trade. Took profit at the minor structure. My recent trading had been plagued by losses so gonna follow you.
EverythingForex
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That's great! Glad to hear you did that and made some pips! I wish I had as well. But I must take the bad with the good. Can't win every trade! GL!
NidalDarawsheh
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very well said, thanks for sharing your idea, "love your stops as much as you love your TPs" both are working for you in.
EverythingForex
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You're welcome! But I don't love my stops nearly as much as my TP's! ;-) I LOVE my TP's to death!