Recently, as I’ve been organizing some trading notes, I’ve found that many people still have misunderstandings about harmonic patterns. In fact, if you master this set of harmonic pattern analysis methods, it can indeed help you identify quite a few potential reversal opportunities—reportedly, the win rate can reach around 70–80%.

Let’s start with the simplest one. The ABCD pattern is an entry-level harmonic pattern: it’s a combination of three waves and four points. The impulsive wave is AB, then there’s a corrective wave BC, followed by another impulsive wave CD—the logic is straightforward. Using Fibonacci retracement tools, BC should precisely land at the 0.618 level. The length of CD should be equal to AB, and the timing should also correspond. Many traders like to place orders in the potential reversal zone near point C, or wait until the pattern has fully formed and enter from point D.

When the difficulty increases, there is the Bat pattern. Scott Carney compiled it in 2001. Compared with ABCD, it adds one point X and an additional wave. If the retracement at point B is exactly 50% of the XA wave, then it’s basically a Bat pattern. The CD extension should reach above 1.618 of BC—sometimes as high as 2.618. The D point of this harmonic pattern will form a potential reversal zone, where traders can open positions based on whether they’re looking for a bullish or bearish move.

There’s also the Butterfly pattern, discovered by Bryce Gilmore. The key of this pattern is the 0.786 retracement level of the XA segment, which is used to determine the position of point B. The Crab pattern is also quite common, and Scott Carney participated in compiling it as well. The most distinctive thing about the Crab is that the potential reversal zone is determined using the 1.618 extension point of XA. The AB segment retraces between 38.2% and 61.8%, and the projection of BC will fall between 2.618 and 3.618.

The Gartley pattern has two hard rules: point B must be at 0.618 of XA, and point D must be at 0.786 of XA. This harmonic pattern is somewhat similar to the Bat, but the B-point retracement level needs to be more precise. The Shark pattern consists of five waves and requires meeting three Fibonacci rules: the AB retracement is between 1.13 and 1.618, the BC segment is 113% of OX, and the CD segment target is 50% of BC.

The Three Drives pattern is relatively rare, because it requires symmetry in both price and time. It is made up of five points: three drives and two retracements. Drive 2 and drive 3 should be extensions of 127.2% or 161.8% of the A and C retracements. The A and C retracements are usually 61.8% or 78.6% of the prior waves. The distance in time should also be as symmetrical as possible—otherwise, the pattern won’t work.

How you identify harmonic patterns depends on the market direction—whether it’s bearish or bullish. Bullish traders believe price will rise, while bearish traders believe it will fall. The same rules apply to both scenarios. If you see a bullish harmonic pattern signal, you can consider establishing a long position; if you see a bearish signal, you can short.

For practical use, it’s recommended that you first spend some time understanding the theory behind these patterns, and then practice identifying them on small accounts. On Gate, you can also find many historical examples of these patterns to learn from. Harmonic trading is indeed challenging, but once you’ve mastered the logic behind these harmonic patterns, it will clearly help with forecasting the market. Let’s do it together!