The Perfect AB=CD Pattern: Strict Rules for High-Probability Setups

A Formula for the Perfect AB=CD Pattern\n\nThe relationship between the different legs of the perfect AB=CD pattern can be expressed with the following formula:\n\n\nD = C + (B - A) * 1.618\n\n\nThis formula assumes that the BC leg has retraced to the 0.618 level of the AB leg.\n*

A Numerical Example: Titan Industries (TTN)\n\nLet's consider the fictional stock Titan Industries (TTN) to illustrate the perfect AB=CD pattern. The stock has been in an uptrend and has formed the following pivot points:\n

• A: $100
• B: $120
• C: $107.64

We can see that the BC leg has retraced to exactly the 0.618 level of the AB leg. This suggests that the CD leg will project to the 1.618 extension of the BC leg. We can calculate the completion point of the pattern as follows:

This gives us a potential reversal zone at $127.64. A trader could look to enter a short position at this level, with a stop-loss order placed above the high of the pattern.

Conclusion\n\nThe perfect AB=CD pattern is a high-probability trading setup that can provide traders with a significant edge in the markets. By focusing on these ideal patterns, traders can filter out lower-quality setups and increase their chances of success. It is important to remember that even perfect patterns can fail, and risk management should always be a top priority. By combining the perfect AB=CD pattern with other forms of analysis, traders can increase their confidence in their trading decisions and achieve consistent results.\n\n### References\n\n[1] Gartley, H. M. (1935). Profits in the Stock Market. Lambert-Gann Publishing.\n[2] Carney, S. M. (2010). Harmonic Trading, Volume One: Profiting from the Natural Order of the Financial Markets. FT Press.