Harmonic Panel - indicator for easy trading on Harmonic patterns
Harmonic patterns are periodically occurring geometric figures identified during a graphical analysis of instrument quotes, built on trend lines of price movements in sizes taken from Fibonacci ratios.
The main advantage of these models is the prediction of the future direction and depth of the trend, the scalability of the signal over all time periods (time frames). In today's article, we will consider an assistant indicator that will perform the whole routine for you in searching and identifying Harmonic patterns on a chart.
Platform: MetaTrader 4
Currency pairs: any
Timeframe: from M1 and higher
Trading Time: Any
Recommended brokers: Alpari, RoboForex, InstaForex
What are the harmonic patterns?
As you know, fluctuations in quotes on the chart (corrections and trends) often fit into the pattern of Fibonacci ratios. Within any directional movement, a trader can predict in advance the depth of the rollback and the level of reversal, both in price and in time. Just select a reference point (usually the beginning of growth or fall) and stretch the lines, channels, fans, arcs, extensions or time zones on the chart from the standard Metatrader toolbox from the Fibonacci subsection
Regardless of the formation, when building everywhere, the proportion of the coefficients of the standard series will be observed everywhere: 0; 23.6; 38.2; 50, 61.80; 78.6; 100 etc. The figure clearly shows how the lines, rays and vertical levels interact with each other, predicting and amplifying the signals of future pivot (pivot) points:
This property was first noticed by Elliott and applied in the creation of the wave theory - the proportions helped determine the top and bottom of the waves.
Pesavento showed how to find and build more complex geometric structures using Fibonacci proportions. For the frequent repetition on the graph and the equal proportionality of the segments of these figures, he called them harmonic patterns, and they were discovered in 1935 by Harold Gartley.
Traders subsequently replaced the word “harmonic” with the name of the author, and “pattern” with the specific name of the figure. The first of them, collected from segments drawn by points at the Fibonacci levels, resembled a butterfly.
Other modifications received names remotely similar to their image - from fish to bats.
Harmonic patterns were highly appreciated for the accuracy and long-term trend reversal / continuation signals and represent a complete trading system. Its disadvantage was the difficulty of detecting and building the formation. “Traders-trackers” were capable of this, devoid of emotions and with a drowned out associative thinking.
Harmonic Panel indicators solve this problem using a code that allows algorithms to search for harmonic patterns on all timeframes and instruments available in MT4.
The code solves three problems:
- Detection of rare harmonic patterns;
- Search the entire list of models of Gartley, Pesavento and Carney;
- Identification of patterns of the formation stage.
Installation and composition of the Harmonic Panel indicators
The archive with indicators contains three files in two folders, the names of which will be a hint about the way of their placement. The process of installing indicators in Metatrader is universal and described in detail in the corresponding article - “How to Install an Indicator in Metatrader 4”.
Find the folders of the same name through the “Data Directory” option and do not forget to restart the program after copying the files. Launching Metatrader, open the settings window for the input parameters of indicators that can be detected:
- Through the Navigator window;
- Using the Insert menu, the Indicators option in the Custom list.
Please note that the third indicator Rare Harmonic Panel distant from Harmonic panel and Harmonic Panel Forecast.
The indicators are not tied to the chart and timeframe, therefore they can be dragged from the Navigator panel or attached via the “Indicators” option to any open MetaTrader 4 tool window. The result of work and proper launch will be a table with a list of currency pairs to be scanned and figures found.
Despite the similarity of the tables and the detected models, in the three indicators of the Harmonic Panel they differ:
- Harmonic panel rare and Harmonic panel - a set of models;
- Harmonic panel forecast - the presence of the “incompleted” function, indicating the stage of pattern formation.
The figure below shows two tables with the same settings for finding harmonic patterns in the interval from M1 to MN. The difference in the number of options is observed visually, it is also clearly visible that on the left in the Rare indicator the Pattern column contains names that are different from the similar column on the right. Harmonic Panel Rare defines only rare types of patterns.
As can be seen from the figure above, each model appears in the table only after the formation is completed, after a certain number of bars specified in the "Age" column. If you compare two tables Harmonic panel and Harmonic panel forecast, then in the last there are lines "incompleted". By clicking on the window with the name of the timeframe and the instrument, the trader can observe the stage of completion of the formation of the figure, which can help him draw preliminary conclusions about the future reversal or continuation of the trend.
Harmonic Panel LED Settings
The settings of the three indicators affect the range, price accuracy, timeframe, choice of types of determined models, functional features of the work: the choice of pairs, timeframes, color gamut, etc. The main window is located in the “Input parameters” tab, divided into blocks:
Dasboard Setting - determines the order in which rows are displayed in the displayed table and the scan parameters for models:
- Symbols is a set of specific instruments, by default these are currency pairs, but a trader can enter any other assets (stocks, futures).
Important! Rewrite the names of currency pairs if the broker publishes them not in the generally accepted format, for example, with mUSD prefixes or other designations.
- Is M1 ... MN Timeframe Enabled - a set of timeframes that are enabled (true mode) to search for harmonic patterns;
- Sort By - selects the column by which melons will be sorted. By the number of columns, 6 types of filters are available with the identical name of the sort mode;
- Sort Type - determines the sort order by the filter selected above: ascending (Ascendent) or descending (Descendent).
Indicator setting - Direct indicator settings for searching models on the chart:
- SwingSearchDepth - indicator period, the number of timeframes within which the models are being searched;
- PriceProximityPercent - percentage of permissible calculation error;
- Display: Points, Ratios, Lines - the option in the “true” mode displays the main points, segments, and Fibonacci coefficients accompanying the construction of the model (see the rules of construction in the article “Harmonic patterns”);
- Display: Bat, Gartley, Crab, Butterfly, Cypher, Shark - the name of the models that in true mode will be displayed on the chart, and when the false option is enabled, they are hidden;
- MaxHistoryBar - a segment of the history by the number of bars on which models will be saved.
Display setting - settings for the color scheme of the models, the thickness of the line segments, labels, as well as font sizes:
- BullPatternsCollor - color of the model, signaling a future price increase;
- Bear PatternsCollor - color of the model predicting a drop in quotes;
- LineStyle - style of segments from which the model is built;
- DottedLineColor - color of auxiliary lines of a harmonious pattern;
- LabelFontSize - font size of text labels;
- LabelColor - color for text labels.
Alert setting - notification system: sound during operation in the terminal, sending e-mail and push messages.
The settings of the other two indicators differ from the above:
- Harmonic panel forecast - the presence of two functions: BullIncompletedPanelColor and BullIncompletedPanelColor, defining the color gamut of the emerging harmonic patterns;
- Rare Harmonic Panel - the presence of lines Display with a listing of models that rarely appear on the chart: Alternative Bat, Three Drives, AB = CD, 5-0, Alternative AB = CD, Deep Crab.
Description of the principles of operation of the Harmonic Panel indicators
To use indicators Harmonic panel, the trader does not have to delve into the mysteries of the geometry of building harmonic patterns. A simple understanding is enough that this is a buy signal if there is a bullish pattern and sell if it is a bearish formation.
At the end of the formation of the last point of the figure, prices can move up or down, at least 50% and a maximum of 100% (and above) of its borders. In the example below, the trader observes Bullish butterfly - a bull’s butterfly, which theoretically guarantees upward movement from the point of the formation (1) of the figure to the key X or B and it is quite possible that it is higher than the maximum “wing top”.
The existence of the “boundaries of the course” of the trend determines the important parameter “Age”, which determines the time elapsed since the formation of the pattern. For example, a figure Cypher («cipher"), Which traders often call the" Sniper "for frequent signal processing, has already formed. A trader can try to take a long position, given the color of the figure, indicating the expected direction of the quotes in the table (plus the signature will be Bullish on the chart).
If the model worked for a long time and the price took key levels of take-profit (went beyond the borders) of the pattern, then it is considered worked out and not considered for entry. Try to focus on the maximum duration of "Age", equal to the period or depth of the indicator specified in SwingSearchDepth.
The selection and display of specific harmonic patterns on the chart occurs by moving the slider located on the right side of the table. You can also click on the window with the name of the tool and TF. Displaying the model and changing the tool and the time format of the chart will happen automatically.
To trade from the first candles after the formation of the pattern - traders can use the indicator Harmonic Panel Forecast. Having selected and displayed a row with the incompleted model from the table, the trader should be aware of the risk of a possible “redrawing”.
Harold Gartley and his followers did not specifically identify “favorite or unloved” patterns; trading books also lack research and evidence of the prevalence of signal efficiency of one or another formation. However, some traders believe that their unusual and rarely seen types provide some advantage in trading. Therefore, a separate indicator was created Rare, where only rare harmonic patterns are collected (which explains the small selection of their options in the table, despite the abundance of tools and timeframes for searching).
Types of harmonic patterns described by Harmonic Panel indicators
The observant Harold Gartley discovered the property of the market to behave in a predictable way (rise or fall), after the emergence of a certain formation of three waves. He marked segments AB, BC and CD, which may be preceded by a certain wave XA and defined a figure called a butterfly. The proportional laying of the waves, in the boundaries of the “wings”, was the main requirement for the predictability of the subsequent trend.
That's why gartley pattern is the most proportional and most recognizable figure, in which AB = CD and certain points B and D are attached to the Fibonacci levels of 61.8 and 78.6.
This rule of linking segments and points was invented by Pesavento, who more widely interpreted the layout options for “butterfly wings”. Therefore the model Butterfly more variably determines the wingspan and length of the segments, allowing the use of a number of different Fibonacci coefficients, without being tied to a specific value.
Bat Pattern (Bat) opened in 2001, it looks like a “butterfly”, but the distance XD is a multiple or close to the coefficient 0.886 discovered by D. Kane, when extracting a root of 4-1 degree from the Fibonacci level of 0.681.
Cypher model ("kefir", "cipher", "Sniper") is a relatively easily recognizable figure due to the peculiarity of the wave of the sun. In other harmonic patterns, it rarely goes beyond the segment XA, while in "cipher"This is a distinctive feature:
Another such example of the extension of the segment BC beyond the limits of XA is the harmonic Shark Pattern (Shark), the moment of formation of which gives the "fin" of the triangle XAB. The formation was opened in 2011.
Crab Pattern got its name because of the small size of the AB segment relative to the proportions of CD and XA, which makes the "filled" triangles more like "claws", and not like butterfly wings.
Figure AB = CD reveals the principle of searching for this pattern in its name. In fact, this is a geometric parallelogram, supporters of the theory of Elliott waves see in him the classic three corrective waves.
5-0 pattern it is considered to be most precisely worked out, where, as in the above case, the parallelism and equality of the sides and the significant length of the BC wave are observed (this is somewhat reminiscent of the rule of the third Elliott wave).
Three Drivers, this is a rare pattern model where the distance between 1-2-3 and the length of AB and CD tend to be identical. In this case, the digital points are located almost on the same line.
In 2002, Scott Carney, disappointed in trading by the bat pattern, proposed his own version, which went down in the history of technical analysis as Alternate Bat. The template differed from the rest by a coefficient of 1.13 and using the ratio 1.618 AB = CD
Ratio AB = CD - the cornerstone of the theory of harmonic patterns, but the ratio 1.618 AB = CD applied above led to the creation of a model "Alternate AB = CD", in which the CD wave ends at 1.27 and 1.68:
Scott Karni was the main seeker of alternative models. Computing new proportions of harmonic patterns, he discovered model deep crab with a deeper correction of point B with respect to the wave XA. He set it at the level of 88.6% of the pullback, which made it difficult to determine this formation, which differs from others in the “short" wave AB.
More details about the history of creation, methods and techniques of construction, as well as methods for using harmonic patterns can be found in a special thematic review.
Graphical analysis is a complex part of trading theory due to the share of subjectivity in the rules of model building. Harmonic patterns are no exception, even despite being tied to Fibonacci, the topic is closed to many traders precisely because of the complexity of determining where the model formation point begins.
The indicators will be of interest to a wide range of Forex bidders as a training tool for building graphic models, a new tool for trading or an additional filter in the strategy.
If you decide to apply the formations discovered by Hartley, or to examine their effectiveness, always remember that they obey the general axioms that have been open since Charles Dow: models work according to the trend, often coincide on different timeframes and correlate in pairs with the US dollar.