Harmonic Trading is a methodology that utilizes the recognition of specific price patterns and the alignment of exact Fibonacci ratios to determine highly probable reversal points in the financial markets.
This methodology assumes that trading patterns or cycles, like many patterns and cycles in life, repeat themselves. The key is to identify these patterns, and to enter or to exit a position based upon a high degree of probability that the same historic price action will occur. Although these patterns are not 100% accurate, these situations have been historically proven. If these set-ups are identified correctly, it is possible to identify significant opportunities with a very limited risk.
One of the most comprehensive references to Harmonic Trading was outlined by J.M. Hurst in his cycles course from the early 1970s. His Principle of Harmonicity states:
“The periods of neighboring waves in price action tend to be related by a small whole number.”
(Hurst, J.M., J.M. Hurst Cycles Course, Greenville, S.C.: Traders Press, 1973.)Read more...