The A-B-C-D Pattern
This Forex pattern consists of a price structure in which each price leg is equal and where the Fibonacci numbers must happen at specific points. For this you will need access to a Fibonacci retracement calculator to help you. First off, lines AB and CD are called “legs” (they should always be equal) and BC is the “correction” or “retracement.” Using a Fibonacci calculator on leg AB the correction on BC should go as far as 0.618 and line CD should continue the 1.212 extension of line BC. The amount of time it takes for the price to travel from point “A” to point “B” should be equal to the time it takes the price to travel from point “C” to point “D” if your calculations are correct. For this pattern to complete it must reach point “D” before you make any moves. This will be the high point to sell or the low point to buy.
The 3-Drive Pattern
Building on from the A-B-C-D Pattern is the Forex 3-Drive Pattern. The first difference here is that instead of two legs we now have three and they are no longer referred to as legs, they are “drives” and the second is there are now two retracements instead of just one. You will need a Fibonacci calculator here as well. Starting off, point “A” needs to be the 61.8% retracement (correction) of drive (leg) 1 and point “B” needs to be the 0.618 retracement of drive 2. Drive 2 needs to be the 1.272 extension of retracement “A” and drive 3 the 1.272 extension of retracement “B.” Make sure here that the time it takes the price to finish drive 2 should equal the time it takes to finish drive 3 and the time it takes to finish retracement “A” should be equal to the amount of time it takes to finish retracement “B” if everything is correct. Using this pattern you can set any short or long trade orders you have once the price reaches point “B” using the 1.272 extension.
Ready to learn more? Check out this article on the Gartley pattern.
