If you’re like most Forex traders, you’re probably not making consistent money yet. You’ve also probably spent hours and hours looking for the best system, or even any system that will produce consistent profits.
And if you’re like most Forex traders, you’ve probably seen a large variety of “systems” out there, but you’ve realized that many of them are very vague: while they give concepts, they don’t give specifics. You’ve read the details over and over again but you can’t find concrete rules for exactly when you’re supposed to enter and exit, and as a result, most of your trades end up losing money. In fact, you may even suspect that the systems were deliberately vague on purpose so that their creators can hold no accountability.
Thus, your search continues…
Consider harmonic trading. Harmonic trading is substantially different from most of the Forex systems you have encountered. For starters, harmonic trading doesn’t rely on indicators. Surely you’ve encountered dozens of systems that use a combination of indicators or even some proprietary indicators, and you know by now that they don’t work because they’re just derivatives of price and really have nothing to do with price itself.
Harmonic trading looks at patterns that price is making, and based on historical instances of those patterns, produces a likely future scenario for the instrument you are trading. In other words, harmonic patterns reveal when you have the best chances of making a profit by going long or short, because in the past when price set up the same type of pattern, price moved the same way https://mytradingtools.com/harmonic-pattern/.
The nature of harmonic trading results in exact entry and exit signals. There is no vagueness or wondering what you should do. This alone will be a welcome change to most Forex traders who are tired of getting confusing signals from their old systems.
Harmonic trading can also be programmed into an auto trader (sometimes called an “Expert Advisor” program). Auto traders analyze Forex charts in real time and give you specific entry and exit signals. In fact, auto traders can even be programmed to take trades for you so that you don’t have to stare at your charts 24/7.
If you’re reading this article it’s most likely because you’re interested in finding a profitable trading method. In fact, if you’re already a profitable trader then you probably weren’t even searching for this article in the first place!
Most traders begin with indicators. You can probably name at least a half-dozen different indicators without even thinking too hard, right? MACD, stochastics, RSI, ergodic, Keltner channels, Bollinger bands, etc. How are those working for you?
After studying indicators, most trader eventually move on to non-indicator based trading styles, such as harmonic patterns, which utilize both price patterns and Fibonacci ratios. Some of the differences between indicators and harmonic patterns can be vast. Here is a brief comparison:
Entry and exit points
Indicators usually have vague rules for entry. Do you enter when the fast line crosses the slow line? Or do you enter when the fast line crosses the zero line? And what settings do you use in the first place? As for exiting, when do you exit? When the lines cross the other way? What do you do during chop?
Harmonic patterns have specific entry and exit points. You enter here. You exit here. What happens in between doesn’t matter. If your MACD chops back and forth 10 times it doesn’t even matter.
Reversals vs. trends
Most indicators are about trying to jump into the trend and ride it, and if you get stopped out, you just jump back in next time it gives your entry signal. There are some exceptions, like Bollinger bands which can be used for reversals, but you’ll end up losing a lot if you get on the wrong side of a big trend.