alright traders welcome back today we're
gonna be talking about padded room pattern recognition and specifically the
ABC equal CD pattern now this is a this is a really great pattern one of the
most basic pattern formation that you're going to see in the market its we use
this pattern in virtually all advanced pattern recognition that we do and we're
going to notice as you go through the course that I've designed in a way that
builds on on each section so in the beginning we talk about the basic
structure analysis this is a new structure hi this is a new structure lo
this is how we identify those how we watch current price action to determine
we know what what type of of market we're currently in is it is a bold
trending pattern is a consolidated market is a bear trending market what
type of market or win we then moved to harmonics and we talked a little bit
about market harmonics in the symmetry that we see inside of those markets and
the reason that we do all of those things because they begin to build on
each other and you're going to see the harmonics that we talked about in module
1 start to come into play here we start talking about a B equals C D patterns as
we move forward you're gonna learn how to quickly recognized the ABC equal CD
pattern and apply it to some advanced pattern formation such as the 222
garlicky and butterfly and the three drives pattern these are all patterns
that we will discuss moving forward in the course but for right now we're just
going to talk about the very very simple very straightforward a be equal CD
pattern ABCD patterns also known as lightning bolt patterns are described as
a rally in the market followed by retracement the market will then rally
again forming an upslope being parallel channel and that was as clear as mud for
you I've drawn a picture the starting at a
the market will rally to be and then once we get to be the market
will show a retracement and then the market will rally again forming a
parallel channel these parallel channels are typically equal distance in length
however CD can extend past a to be so we can get a little bit more out of the c2d
like it doesn't always terminate exactly at a one-to-one measured movies
sometimes we will fall a little short but we will eyeball you know and plan
for a perfect symmetrical a be equal CD pattern the same holds true in a
declining market where price action creates two equal distant moves in a
downward parallel direction so you know it doesn't matter whether the market is
going up for the markets going down a B equals C D patterns will follow the same
basic course of action these patterns can be found in all markets and all time
frames it is the foundation of the guard Lee buy and sell patterns as well as a
butterfly three drives patterns will discuss later it's important when
studying these patterns to understand what invalidates the pattern what means
the patterns no good if BC exceeds a b then that negates the pattern the bc leg
can be a basically a 100-percent retracement of the a/b leg but it can't
break it these are also known as double tops and
double bottoms and number 3 D must exceed be in order for the pattern to be
complete these are pretty self-explanatory if you draw this out on
your paper you're going to notice that yeah just it makes it makes common sense
that hey in order to have a lightning bolt pattern d must be above above be and that if the
bc leg the retracement leg extends past the initial impulse leg that we're going
to not have an a B equals C D pattern but you know I run through them with you
so just that you've got a couple a list of things that will negate the pattern
now this is what I want to do this will this I think will really help you in
identifying the ABCD patterns are going to look at some charts and what I want
you to do is pick out the ABC equal CD pattern will
start with an easy one now take a look at this chart and tell
me can you see the ABC equal CD pattern here there it is in this case bc the bc
retracement was very shallow you can see this very shallow b2c retracement not
even a 382 retracement out of there but you can clearly see the ABC equal CD
pattern here you're going to regularly hear me refer to this as a Fibonacci
failure pattern or a one-to-one measured move those are some common terminologies
inside the live room inside the training and moving forward that you're going to
hear me say Fibonacci failure pattern or a one-to-one measured move here's another one take a look at it take a half a minute
identify where you think that Fibonacci are that one-to-one measured movies
gonna come in at $TIME and there we go now as you can see it took a lot longer
here for see to move up it did not follow exactly in line with the previous
impulse like that is absolutely fine but you can see we got a termination almost
almost exactly at that a B equals C D at that determination beautiful beautiful symmetry there on
that a B equals C D pattern try it again this was probably a little bit easier
for you now that you've been looking at him a be equal CD perfect perfect a be
equal CD pattern beautiful the question is did you catch the other
one on this chart oh and as you guys can see on the second
ABCD you did c.c. to determinate just below the completion of the pattern we
do see this happen from time to time remember traders these are these are
estimates engages of what we think the markets going to do they don't always
line up perfectly one of the biggest problems that traders when they see or to look at some of these patterns
formations that they think it has to be perfect that it has to stop right there
and dead on if we stop a little bit shorter a little bit far that somehow
this isn't a qualified pattern or qualified a be equal CD movie it
absolutely is but i just wanted to show you the
difference in ascending and descending pattern formation so that you guys you
know can continue to train your eye to recognize a pattern training that
reticular activating system that's what we want to do and again a B equals C D
take a look at it find it identify it perfect a de qin CD pattern right down
in you see the market base and then rally a beautiful beautiful system now
the longer you hear me say this again and again traders the longer you spend
in the market the more time that you devote to the study of patterns the more
proficient you're going to become at it this is not something where you can get
this is not something that is just going to all of a sudden you can learn it in
an afternoon and now from here on forward you can constantly identify a B
equals C D patterns you have to train your eye to recognize it you have to
train your eye to know what it's looking for and to begin to pick out these
pattern formations as they occur remember nothing of value comes easy
anything worthwhile takes work anything worth having is worth working
for you've all heard the clichés but it is absolutely absolutely true you must
must must continue to study continue to work on this on a daily basis that's why
we have the ratio trader up in the live room so we can continue to identify the
patterns and we can watch them together as a group I can continue to show them
to you on a daily basis and ultimately shortly you'll be able to recognize them
on your own now how to trade the ABCD pattern there are really two ways to
trade it they more or less different how you draw the fibonacci retracement now I
know we haven't gotten to fit yet but it's okay i'm gonna i'm gonna show you
how to draw it so that you can begin to become a cut from the kind of drawing Fibonacci
retracements upon completion of the ABCD pattern of Fibonacci retracement will be
drawn either from the full length of a 2d or from C to D leg initial target
will be the 618 retracement of the FIB however once the market pulls back to
382 stops will move to break even i know that that may not make a lot of sense
when it's written out him in word format but i want to show you in on a chart it
will make perfect sense when you see it pictures worth a thousand words right
here we have a beautiful lady equal CD pattern pop followed by a pullback let's
look at both of the ways that we draw on the fibs and talk about the differences
in the first scenario we draw the FIB from a all the way 2d could the complete
movie the pattern formation and you see the market has pushed through the 382
retracement and is on its way to the 618 in this case stops would now move to
break even and we would be looking for a 618 to take profits now traders you know
in the live room everything that we do is done into contracts the rules for
trading the ABC equal CD pattern that i'm showing you right now are based on
11 unit or one contract so in the in in the event that you only have 11
contractor one unit to trade your going to want to look for the $YEAR 6 18 and
as the market comes down into the 382 you're gonna move your stops to break
even now in the event that you're using two units are two contracts like we do
in the room with most of our trading what you're going to do is half of the
half of the contractor or one unit will come off here at the 32 stops will roll
to break even and then the balance will be left open in the event that we do
come into the 618 but this is the first way to do it drawing all the way from a
all the way 2d with anticipation move back into a 618 retracement the second
scenario we draw our fit from C to D so just a very very short leg here and the
market has reached the 618 retracement as you can see when we redraw our films
in this Jason market went straight to the 618
this is a more conservative approach to training the abl CD pattern either way is fine as long as you do the
same thing each time and that's critical traders you have to do the same thing
every single time you don't draw it once from down here because you've been on a
really good winning streak and you're anticipating more winners and so you
want to try to get capture as many prophets as possible and then when
you've had a few losers you say well i'm just going to draw from here to here
this time because i really need a win here you have to do it the same way
every single time be consistent with your trading be disciplined with what
you're doing I cannot tell you the effect that will
have on your trading by just doing that one simple thing in this case regardless
of how many contracts your trading or how many units are trading you will wait
for the 618 stops can move to break even at the 382 however you've got such a
shallow move here that I probably would not do that i would recommend that you
leave your stops above the swing high until the target is reached and you
basically will get a UH around a one-to-one risk profile on that in conclusion they be equal CD pattern
can be found in all markets and all time frames is one of the most common and
valuable patterns you will learn because it forms the foundation most of the
advanced pattern formations the ABCD pattern can be traded on its own or in
conjunction with other pattern formation such as the 222 Gartley and butterfly
patterns which of course we're going to learn in a later lesson and this has
been a overview of the ABC equal CD pattern of course if you have questions
or comments or concerns with anything that you saw in this lesson just email
me traitor and forex traders live.com and we'll get it sorted out I don't always get all of the
information and I know that sometimes a there's something that I've overlooked
or I've missed and we need to add into this program and when that happens i
want to make sure I can do that so if you have questions make sure you email
me till next time traders good luck and good training