This is how it works with harmonic chart patterns – they have exact numbers and shapes that must occur for a trade to be made. The Cypher pattern is a reversal formation within the harmonic class of patterns. It occurs across various financial markets including Forex, futures, stocks, and crypto. The cypher pattern consists of four separate price segments, with defined Fibonacci relationships.

• The BC segment continues the movement of the first (XA) segment and forms a higher high.
• However, even though it has a bigger winning ratio than the other harmonic patterns, the Harmonic Cypher structure can be spotted very rarely on the chart.
• Harmonic trading is a kind of technical analysis generally used across futures, stocks and forex.
• Here, in this article, we explain how the Cypher harmonic pattern works, identify it, and trade it.

Upon the price reaching the 78.6% retracement level at point D, the bullish Cypher pattern is considered complete, and a price rise is expected. The CD leg moves lower and terminates near the 78.6% retracement level of the price move from point X to point C. That is to say that if the wick within the candlestick appears inordinately large, then I typically opt to use the candle close for measuring the specific point.

How to Trade The Cypher Harmonic Pattern

Soon after our sell entry order was triggered, prices began to move lower quite sharply, ultimately triggering both of our target levels and resulting in a profitable trade. From the swing low at point A, the price begins to retrace higher. As such, it is just slightly outside the ideal maximum retracement level of 61.8%.

• This level is marked on the price chart with the black dashed line below the entry point.
• The selling pressure continues until it reaches the swing low at point A.
• The initial leg of the pattern is called the XA leg, and is impulsive in nature.
• For the most part of the harmonic patterns, it’s best to lock in profits as soon as possible.

Of these rules, the first and last are the most important for the Cypher pattern. You can do this in MATCH, CREATE and MERGE, but not when using patterns as expressions. For more information on how to use relationship type expressions, see syntax/expressions.adoc#relationship-type-expressions. FXOpen is a global forex and CFD broker, with a network of worldwide brokerages regulated by the FCA, CySEC and ASIC. FXOpen offers ECN, STP, Micro and Crypto trading accounts (dependent on entity). Update it to the latest version or try another one for a safer, more comfortable and productive trading experience.

Patterns for nodes

We want to make sure we capture as much as possible from the new trend. If you’re not a fan of reversal strategy, and you prefer a trend-following strategy, we encourage you to follow the MACD Trend Following Strategy- Simple to Learn Trading Strategy. The strategy has attracted a lot of interest from the Forex trading community.

The Cypher is also more advanced than other patterns, like the Gartley, Bat, or Butterfly, so you may need to spend some extra time learning how to recognise and trade it effectively. Once you master the skill, however, you’ll find that the Cypher can be a valuable addition to your trading arsenal. In trading too, price follows the most harmonious path possible. The bearish Cypher forex pattern has been outlined and shown within the light blue shaded area. Starting from point X, the price of the EURCAD begins to decline sharply.

Bullish Cypher Pattern Example

Target 1 was reached fairly easily, followed by target 2 which was also triggered. And as a result, we would have realized a profit on this trade. We’ll now go through an actual trade example of a bullish Cypher pattern in the Forex market. For this example, we will be referring to the 240 minute chart of the Australian dollar to US dollar currency pair. The second leg within the cypher pattern must retrace within a specific Fibonacci range of the initial leg. So within the context of an uptrend, the cypher pattern makes higher highs and higher lows during its formation.

You can detect the Harmonic Pattern Indicator on the most popular Forex trading platforms (TradingView and MT4) in the indicator section. It’s not a mystery that geometric patterns are in the Forex price chart. The Cypher pattern forex is part of the Harmonic trading patterns and is the most exciting harmonic pattern. Here, in this article, we explain how the Cypher harmonic pattern works, identify it, and trade it. The stop loss would be placed above the swing high of the X point as is illustrated by the black dashed line above the entry. And finally, you can see the two target levels marked on the price chart, which correspond to the swing low of point A, and the swing low of point C.