Technical analysis in the Forex market includes different methods of assessing the market situation. Among them, a special place is occupied by the search for so-called harmonic models. Today I want to talk about them. It has long been noticed that the market has a cyclical nature. That is, some situations can be repeated after a certain period of time. And that fact can be used in your trade. Harmonic models of Japanese candlesticks got this name because they appear on the price chart naturally and resemble figures that can be seen in real life. The most popular models of this type: butterfly, crab, bat. Fibonacci numbers are used in their construction, which allows to predict the trend reversal with a high degree of accuracy. But like any other method of market analysis, harmonic models have their disadvantages. You need to know about them in order to improve the quality of trading.
Deficiencies of harmonic models
One of the main disadvantages of working with such models
is the difficulty of building them properly. Therefore, to use in trade at once
a few figures aren’t easy. This task can be made easier by means of special
programs that will track and build harmonic models on the price chart.This method of analysis will not give the desired result when trading
inside the day. Its efficiency is confirmed only in the medium term trading.This model is very easy to change. Lengthening one
from the sides destroys the figure. Besides, sometimes a single model can
to transform into another. All this makes it difficult to accept optimal trade
solutions.Production of several harmonic models on a chart
overloads it with lines and complicates the assessment of the market situation. You can skip it.
important signals to open trading positions. Harmonic models can give contradictory signals
at different time intervals. So to make a trade decision
you need additional analysis tools.Probability of stop-loss operation is high enough. If there’s a big one.
number of traders open orders and place stop-losses based on
of the formed harmonic model, a large market participant may
to take advantage of this. He’s just gonna eat their stop-losses.Harmonic models can be very useful for a trader. But their use in real trading is allowed only after the preliminary development of skills on a demo account. The use of these figures in trading requires care and caution. And I wouldn’t recommend that you build your trade on these models alone. The use of additional analysis tools will reduce risks and improve the overall trading result.Fyodorov’s Inga04.06.2019