It isn’t as old as some harmonic patterns like the Gartley. The financial market heard about the shark harmonic pattern in 2011. When you see it in a chart, it shows you a trend reversal might happen. Generally, it is accurate, so when you see it, it’s time to trade.
What Is A Shark Pattern?
The shark harmonic pattern has five points. Two of these price points are where the retracement and reciprocal take place. As such, one of the shark harmonic pattern rules is that you should see an 88.6% retracement. Also, price swings can help you predict future price trends.
How To Trade The Shark Pattern
In shark pattern trading, you’ll be charting to see a trend reversal after four price swings. Based on Fibonacci ratios, an ideal entry point is 88.6% of OX when trading in a bullish shark. Your stop loss order should be at C, whether trading in a bearish or bullish pattern.
How To Identify A Shark Pattern
One difference between this and other harmonic patterns is the five points. A shark chart uses O, X, A, B, and C points. That’s different from other patterns showing XABCD price points. Plus, you should also know its Fibonacci ratios.
Without these, you might confuse the shark pattern with others like a cypher, bat and crab.
Another distinguishing feature is the form of a shark. In the other patterns, the second point is higher or lower depending on whether it’s a bullish or bearish pattern. However, in a shark pattern, it’s the third point that’s highest or lowest.
Example Of A Shark Pattern
As with other harmonic patterns, a bearish and bullish shark pattern differ. Hence, if you’re charting for a bullish pattern, it’ll appear like an M. On the other hand, if the chart has a bearish shark pattern, it’ll display W.
B is at 113% of XA in a bullish form, while C is almost 113% of OX. Further, you can differentiate a cypher from a shark pattern by looking at the second leg. In a bullish cypher, there’s a Fibonacci retracement between 38 and 61% of XB.
