backtesting potential reversal zone with harmonic pattern plus_1_1

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aterials

manual Backtesting Potent

Harmonic Pattern

Harmonic Pattern

English

Harmonic Pattern,

Plus, Trading, Fore

Harmonic Pattern

10 May 2015

1.1 (27 March 201

m or any of our products (leave empty if you don’t us

MetaTrader 4 or M

Build 950

Harmonic Pattern

Pattern Scenario Pl

7.0, 7.0

2

rading-investment.com

ial Reversal Zone with

Plus (or with

Scenario Planner)

Harmonic Pattern

x, Investment,

Scenario Planner

)

e)

etaTrader 5

Plus (7.0), Harmonic

lanner (7.0)




Backtesting Potential

with Ha

Note this manual may contain


Reversal Zone with Harmonic P

monic Pattern Scenario Planner

10 May 2015

s technical terms and this manual is intended for education

3


ttern Plus (or

al purpose only.




What is Potential Reversal Zon

Potential Reversal Zone (PRZ)

overlapping together. When se

each other, this area should be

support and resistance, this PRZ

probable breakout zone. In an

bounce back hard at this PRZ l

PRZ levels are not always pre

sometimes. So it is much mor

approach.

With some knowledge with har

success rate. In the picture bel

shown. Understanding the basi

purposes in your Harmonic Pa

harmonic Pattern. Also this PRZ

targets.

Figure 1: Potential Reversal Zon


?

is an area where 3 or more Fibonacci Ret

eral layers of Fibonacci Retracement levels ar

treated very carefully for your trading. Using th

area can act as both highly probable trend reve

ther words, you will find that price can eith

vels with unusually high volatilities. It is impor

dicting the trend reversal. But it will predict

e practical to take PRZ levels in terms of su

onic pattern trading, this PRZ levels can help y

w, automatically identified PRZ lines by harm

characteristics of PRZ levels, you can use the

tern trading. PRZ can be used to confirm the

can be used to place your stop loss or trail you

for bullish Harmonic Pattern.

4


acement levels are

stacked up near to

classic definition of

rsal zone or as highly

r penetrate hard or

ant to note that the

price breakout too

port and resistance

u to trade with high

nic pattern plus are

for many different

last point D in your

r stops or take profit




The structure of PRZ Levels in H

Fibonacci Retracement is a po

Fibonacci Retracement manuall

lowest point in your chart. Th

23.6%, 38.2%, 50%, 61.8% and

your Fibonacci Retracement can

Figure 2: Fibonacci Retracement

PRZ levels in Harmonic Patter

detect more significant suppor

available Fibonacci Retraceme

pattern with XABCD notation, h

these four legs:

1. Internal Price Retrac

2. External Price Retrac

3. Correction Price Proj

4. Future Price projecti


armonic Pattern Plus and Harmonic Pattern Sc

ular support and resistance identification tec

y, you may need to identify two peaks includi

n you can draw retracement level in Fibonac

00% etc. Depending on the order of highest p

be setup for both ascending and descending or

example drawn using two peaks in ascending o

Plus uses this Fibonacci Retracements idea

and resistance levels. Harmonic Pattern Plus

ts from the five points making up the patter

armonic pattern plus will calculate Fibonacci R

ment (XA)

ment (BC)

ction (AB or ABCD)

n (CD).

5


nario Planner

nique. To draw this

g highest point and

ci number including

ak and lowest peak,

ers.

rder.

nd extend them to

will consider all the

n. For example, the

tracements from all




For starters, the name of points

the most of patterns will start f

need to make entry decision.

Figure 3: Typical XABCD pattern

Some curious readers, we will s

one example bullish harmonic

below:

A. Draw Fibonacci retrace

B.

Draw Fibonacci Retrace

C. Once you have drawn

identify PRZ levels by d

together.

Note that without final steps, t

chart extremely complicated to

must filter out many fuzzy Fibo

some patient traders doing all t

doing it for your trading. They w

this steps manually will take q

Pattern Scenario Planner can

backtest this PRZ levels for e

Harmonic Pattern Scenario Plan


and each lags are shown in the figure below. F

om point X except ABCD pattern and few other

price trajectory for both bullish and bearish patt

how the steps of how to do such a complicated

attern. The steps can be broken down into 3 s

ent for XA and BC upwards legs.

ments for AB and CD downwards legs.

he Fibonacci Retracements from all these fou

etecting area where 3 or 4 Fibonacci Retracem

he Fibonacci Retracements levels from all four

interpret for your trading (Figure 6). Therefore,

acci Retracements levels from your charts (Fig

ese steps manually. Of course identification of

ill help you to make good profits for your tradin

uite good efforts and time. Harmonic Pattern

o tedious task automatically in less than 1 se

ach patterns on historical data with Harmon

ner. Learning how price reacts over these PRZ l

6


r Harmonic Pattern,

s. At point D, traders

erns.

task manually using

b steps as shown in

r legs, then you will

ents are overlapping

legs can make your

as the final step, one

re 7). We have seen

PRZ levels are worth

. However doing all

Plus and Harmonic

cond. You can even

ic Pattern Plus and

vels can help you to




master many profitable tradin

scientific way of developing you




g strategies with harmonic patterns. This is

r profitable trading strategy.

from XA and BC upwards legs.

from AB and CD downward legs.

7


really objective and




Figure 6: Combined Fibonacci

Fibonacci Retracements are rea

to identify overlapping and sign

trading.

Figure 7: All fuzzy PRZ lines are

are shown from Harmonic Patt

harmonic patterns.


Retracement from all XA, AB, BC and CD le

lly complex and not so much usable for your tr

ificant PRZ levels only among these complex li

automatically filtered out. Only clustered and

ern Plus. As you can see, it is much easier to

8


s. These combined

ding. It is important

es for your practical

verlapping PRZ lines

spot the entry with




In Harmonic Pattern Plus, ther

Those input settings are all und

levels from you charts if you p

other preferred setup. To do thi

The most important input in y

Overlapping distance. Human tr

algorithm requires some criter

Retracements in your chart. The

A. Potential Reversal Zone

B. Potential Reversal Zone

“Potential Reversal Zone Overl

distance in relative to the patt

bigger size patterns, we should

PRZ overlapping relative limit us

all the other fuzzy Fibonacci Re

for PRZ overlapping relative limi

see fewer PRZ levels in your ch

PRZ overlapping distance is to u

Potential Reversal Zone Overla

distance is smaller than 1 pip

Relative Limit and Absolute Limi

priority. To use absolute limit, ju


e are many ways to control this PRZ identific

r the “PRZ option” of the input setting. You ca

refer to use different style of Harmonic Patte

s, you will need to set “Use Potential Reversal Zo

our PRZ option is to set the limit of the Pot

ader can detect the PRZ without too much co

ia to separate significant PRZ levels from all

two inputs to define the PRZ levels in your char

Overlapping Relative Limit

Overlapping Absolute Limit

apping Relative Limit” input control the limit

ern Size. This is in fact the preferred option b

allow larger overlapping distance between Fib

es fraction of the pattern size to separate signifi

racements. Normally you can use 1% (0.01), 2

t. 1% means tighter overlapping distance than 3

rt 1% limit in comparing to 3% limit. Another w

se absolute limit using just straight pip value. Fo

ping Absolute Limit = 1 pip, then the PRZ lev

will be shown in your chart. You can‘t use b

t at the same time. If both are on, then relativ

st set Potential Reversal Zone Overlapping Relat

9


tion in your charts.

n switch off this PRZ

n Trading with your

ne = false”.

ntial Reversal Zone

plex rules. However

the fuzzy Fibonacci

include:

of PRZ overlapping

ecause for relatively

nacci Retracements.

cant PRZ levels from

(0.02) or 3% (0.03)

. Therefore you will

ay of controlling the

r example, if you set

els with overlapping

th PRZ Overlapping

limit will be used in

ive Limit = 0.0.




Figure 9: Input setting for PRZ o

To backtest these PRZ levels o

Harmonic pattern Plus will show

your trading strategy with large

pattern search”. “Amount of Ba

input setting.

More practical consideration of

As you can see from the scree

levels identified by many overl

below are very clear (Figure 10

PRZ levels. However, sometime

11. The reason behind this is in

matching to the ideal patterns

harmonic pattern.). In this case,

you may apply more strict criter

your Potential Reversal Zone Ov

you may apply Potential Revers


tion.

er many different patterns, click “<< “or “>>”

next patterns on your charts with PRZ levels. If

samples of Harmonic Patterns, increase “Amou

rs to scan for pattern search” is located under “

PRZ levels

shot below, PRZ levels are very important su

apping Fibonacci Retracements. The PRZ level

and you can definitely play your tactics with f

, the detected PRZ lines are not clear for tradin

general because the detected harmonic patter

eaning that it has higher MAPE (if MAPE = 0.0,

you may skip your trading for this harmonic pat

ia to detect PRZ levels from your chart. For exa

erlapping Relative limit from 0.03 (3%) to 0.02 (

l Zone Overlapping Absolute Limit instead of Rel

10


on your chart. Then

you need to develop

t of Bars to scan for

User Option” of your

port and resistance

in the screenshots

ull advantage of this

g as shown in Figure

s are less accurately

then it is the perfect

tern. Or alternatively

ple, you can reduce

2%). Or alternatively

lative limit.




Figure 10: Bearish Harmonic Pa

limit = 0.03). PRZ levels are nicel

Figure 11: Bullish Harmonic Palimit = 0.03). PRZ levels are little


ttern with PRZ levels (Potential Reversal Zone

y placed on the chart for your trading.

tern with PRZ levels (Potential Reversal Zonebit unclear for trading.

11


Relative Overlapping

elative Overlapping




Figure 12: Bullish Harmonic Pa

limit = 0.02). All the unclear PRZ

Successful trading requires hig

and to think ahead before mark

as the harmonic pattern is dete

as stops and take profits. You c

you can mark these important p

With Harmonic Pattern Scenar

Indeed harmonic Pattern Scen

However, predicting future is

more difficult. Therefore, it is n

term forecasting, you can alwa

access to future information.


tern with PRZ levels (Potential Reversal Zone

levels are filtered again leaving only clear PRZ le

ly efficient operations meaning that it is impo

t. Therefore, you should identify these importa

cted. Your entry level can be calculated using t

n always lock the patterns with PRZ together in

rice levels to monitor throughout your trading s

io Planner, you can even predict future patte

rio Planner is an amazing tool designed for s

uch more difficult and especially predicting f

ted that you should make short term prediction

s take advantage using your early planning o

12


elative Overlapping

vels.

tant for you to plan

nt PRZ levels as soon

is PRZ levels as well

your chart. This way

ssion.

rns with PRZ levels.

phisticated traders.

rther future is even

if possible. For short

er others who can’t




Figure 13: Future Predicted Ha

levels.


rmonic Pattern using Harmonic Pattern Scena

13


io Planner with PRZ

backtesting potential reversal zone with harmonic pattern plus_1_1

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