FX Harmonics

V

Veyron 16.4

Not a single Harmonics thread in the FX section of EliteTrader - Wow!

Certainly, a subject worth exploring. All the major pairs seem to do, is produce harmonic patterns. All day, all the time - they don't seem to do much else, really.

I think one of the long standing issues surrounding harmonics in FX has been, which set of ratios to use and which patterns are the most valid - that is - have the highest probability for success.

I'm in the process of building a real-time harmonic scanner in Excel, my prototype platform of choice. I've also seen one developed using either Oracle, or Microsoft SQL Server, though I'm not sure that it was real-time. As opposed to using ZUP in MT4, I can use Excel to collect data as well as scan for patterns. Something ZUP cannot do. This will give me the ability to conduct analysis of the patterns, their ratios, optimal ratio configurations and optimal trading ranges with MAE/MFE brackets.

If the scanner prototype and the resulting analysis proves worthy, I'll then work on an integration path into my existing Excel based trading system, which is now a real-time trade execution system. Of course, first things first - I need to generate a Harmonic POC with empirical/historical significance, before including such a module into the existing system.

In the meantime, let's talk FX Harmonics.

I've ignored them for quite some time, since moving to FX. Primarily, because the development of my trading system took priority and it is based on non-conventional TA that I developed from scratch. So, I really considered Harmonics "conventional" and thus, did not want to include that research. Since completing my system, I've had some time to explore other areas that once interested me.

I found Elliot to be a bit too fragmented in its logic and open to wide ranging interpretation, so I basically left that alone, to those more capable of dealing with Elliot properly. Of course, that left Harmonic Patterns and of course, that lead me to Gartley & Pesavento, primarily. Larry, likes to focus on specific ratios, but what I plan to do is, rather than only focus on specific ratios, I'm going to allow the market to produce whatever it wants and then conduct analysis on the full range of ratios the market produces, to determine if a sweet spot exists or not.

Working with real-time data in Excel, can be a pain in the rear sometimes, but with Excel, I also get maximum design freedom - something I can't get with MQL. Of course, the optimal solution would be OOP (probably C-Sharp), but I don't want to prototype in OOP, because it would be a slower process. Excel is raw, and I get maximum creativity. The problem is that these harmonic patterns are really three dimensional and Excel uses a two-dimensional Row/Column framework. So, you have to get creative in simulating a three dimensional environment in Excel - and there are (logical) ways to accomplish that.

Anyway - what's been some of your experience with FX Harmonic Patterns? I can open up almost any FX chart and see them naked, without any scanning system. Of course, keeping track of all of them with my bare eyes is not possible, but it seems as if the FX market does nothing but produce Harmonic Patterns all the time.

In fact, its kind of scary when you look closely at an M1 chart in FX, and start to see just how many the market naturally produces them. They key, is going to be synthesizing and linking these patterns together, to form a probability for a trading range. Of course, in order to do this, I know that I'm going to have to synthesize across a unique set of time-frames that I'm not yet ready to talk about in public.

Whoop! There goes another one on the M1 EURUSD. These things are happening all the time.

- What if the entire FX market were one giant Harmonic Pattern in continuous transformation from one set of ratios to another?

That's a freaky and funky thought. :)
 
I'm not into the "mystical" side of Larry's presentation, nor am I much interested in the Astrology component of his talks, however, the Fibonacci Ratios are what interest me, as I have found that they simply occur and then re-occur with far too much frequency and precision (if measured from within the correct range) to be ignored.

I'll start this off with this video. If you are interested, you can watch the other eight (8) on your own on youtube. He doesn't really get into FX Harmonics until the 3rd or 4th video in the series, but I just thought I'd start with the first one.

<iframe width="425" height="349" src="http://www.youtube.com/embed/fry6z_0p92E" frameborder="0" allowfullscreen></iframe>
 
If you are interested in harmonics / Pesavento Patterns,
use Ensign Software, there is an automatic funtion for this buildt in :-)

(with free FX feed included)
 
We have harmonics traders in our group. Learned variously from Larry Pesavento, Scott M Carney, Derek Frey, Chris Hall (FXGroundworks). Recent a guy Ross Beck is marketing his courses too. Many discussion threads on other forums already. What new stuff do you present here?
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But if you could discuss advanced patterns like 5-0 continuation that would make this thread stand out against the established threads on other forums.
http://3.bp.blogspot.com/_buPOR1D4eXw/TQEA6VqSViI/AAAAAAAAFeg/Ehe5VqM_-Bk/s1600/AUDUSD.png
http://1.bp.blogspot.com/_buPOR1D4eXw/TP-Qit-1R5I/AAAAAAAAFd4/O_zjYAxnHcE/s1600/GBPUSD.png
 
Quote from Veyron 16.4:
- What if the entire FX market were one giant Harmonic Pattern in continuous transformation from one set of ratios to another?
That's a freaky and funky thought. :)
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That is what Larry and Scott and Bryce Gilmore been saying for over 20 years. You made it sound like a new discovery. I know people don't read their books because "books are written by people who can't trade ....", but what you just found out is not new, with pioneering work by Larry and Scott. Read a book, maybe start with grand old H.M. Gartley's 1935 book page 222.
FXGW%2BPatterns.jpg
 
Quote from moarla:

If you are interested in harmonics / Pesavento Patterns,
use Ensign Software, there is an automatic funtion for this buildt in :-)

(with free FX feed included)
More...

Hey, Moarla.

Yes - Larry, did work with Ensign to do this quite some time ago, I believe, long before ZUP (not sure) and it does include an FX feed. However:

a) Larry, goes after specific ratios while passing on others.

b) I need to capture harmonic pattern data for probability analysis of all ratios in all time-frames, which Ensign does not do.

So, I end up having to prototype my model from scratch.


Quote from Xspurt:

Veyron how about you showing us how you use it?
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I don't use it yet. I don't use anything that I have not certified for use within my trading system and I don't use anything (live) that is outside of my trading system.

I've been studying it for a while now, and I believe that I have compiled enough primary research data to start a prototype. After the prototype, comes the POC, then the integration into the current system for use on a live account.

The way I will use harmonic patterns will be no different than anyone else. However, what will be different, is the way I approach the algorithms for use in actual trade signals. This is where the statements about synergy in my first post come into play.

Harmonic synergy across multiple custom time-frames. The level of time-frame customization will depend on the level of research that one undertakes. Standard time-frames are what most people use. However, my research indicates that there are 'hidden' harmonics occurring in the market all the time.

In fact, from what I can glean, that's all the market is doing - moving from one harmonic to another through a continual or perpetual shift or phasing of pattern ratios.

So, my approach will be somewhat different, indeed. Building in in Excel, is going to be a challenge, but I've built a multi-engine, multi-dimensional trading system in Excel before, so I feel confident that I can build this additional Harmonic Engine.


Quote from frank01st:

But if you could discuss advanced patterns like 5-0 continuation that would make this thread stand out against the established threads on other forums.
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Hey, Frank.

Scott Carney's 5-0 Pattern.

What Scott, calls the 5-0 "Reciprocal AB=CD" feature that makes the 5-0 unique among harmonic patterns, is what had been calling a Long or Short TCD Ratio Pattern, in my system for quite some time. The difference being that my TCD Ratio Patterns did not feature a specific 50% retracement of a previous leg. Of course, my TCD patterns are based on a completely different concept than the fundamental XA, AB, BC, CD legs.

To derive my TCD pattern, you would have to take Scott's 5-0 pattern and add a Time dimension to the entire pattern, which Scott, does not do. You would then simply subdivide Scott's 5-0 pattern through the midway point of the time-series, basically - slicing the 5-0 patten vertically, right down the middle, such that leg AB would be in Bar[1] and leg BC would be in Bar[0]. Or, any bar count, just as long as BC was the current bar and AB was the next trailing bar in the time-series.

I created this indicator many years ago, and I kept extending and improving it over the years - about 10 years total now. Scott, places a lot of emphasis on the 50% retracement requirement and concludes that this is what helps to make the pattern unique for establishing its trigger. My TCD Ratio Pattern trigger is actually a continuation (to a specific point) of either TCD leg (which I have not and cannot define here) to a specific level. At that point, Scott calls it the "D" level and the trigger is released.

Scott, does not have a fully integrated trading system in the sense that he uses multiple dissimilar inputs from custom indicators across multiple time-frames. Nor, does he use an integration of signal engines through a signal processing layer to produce trade signals and trade profiles. So, our approaches have been and remain quite different.

I'm interested in these harmonic patterns in terms of how I might integrate them into an already existing trading system framework/architecture.


Quote from frank01st:

That is what Larry and Scott and Bryce Gilmore been saying for over 20 years. You made it sound like a new discovery.
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They absolutely have not been saying that same thing for over 20 years. They each focus on mono-pattern set-ups and have never published a single word about Synergistic Multi-Dimensional Harmonic Pattern Architectures. I would suggest that you re-read what they've actually published. As, what I am referring to, is completely different - if you've bothered to read the original post.

None of them, have ever even attempted to dynamically link ratio to ratio. And, that is the big difference, here. Furthermore, Scott, clearly tells you that he believes there are only a few specific ratios that have high probability. Larry, backs that up almost verbatim. Beck, is the only one who is willing to accept the fact that there might be a more "flexible range" of ratios that speak to the market's transition phases from one scale of ratio to the next, but even he stops there and wont go any further.

I'm suggesting, probably for the first time in this industry, that the ratios themselves are most likely polymorphic - thus, when one pattern is seen to "fail," its more likely less the result of a dysfunctional pattern, as it is a transitional phase from one dominant ratio level to another dominant ratio level.

Read Constance Brown's book on Fibonacci Analysis, for a better understanding of WHY most people incorrectly establish the initial "price range" for establishing what Harmonic traders label as X.

No one to date (that I know of, or have read) has even tried to link the ratios as I plan to do. No one. If you can point me to a link containing such a public declaration, I'd be more than happy to read it. :)

I don't bother with research on convention. I only tackle the very difficult challenges and only allow non-traditional technical components into my trading system. So, the very fact that I'm interested in Harmonics, is proof positive that I have to be doing something different with them - by definition.

I don't do "traditional." 95% of the people in trading are doing "traditional" and the failure rate indicates that convention is not working out for them. If I'm spending my time involved in research, you can pretty much go to the bank on the fact that it is not traditional research. That's been my technical analysis MO for more than 10 years. Convention has not gotten me this far.
 
Great. Another thread by one of those "I just discovered something fantastic!" "No one else had done this before!". We'll see what you can show here other than babblings. As they say, show me the money.

You must be related to bearice or Jack Hershey.
 
Hi Veyron,

an interesting topic you bring up here. It is indeed amazing how markets obey harmonic relationships. There is more to it than simply a self fulfilling prophecy at work.

I try to spot confluence of several harmonic retracement and projection levels...however, done manually during the trading session, it can interfere with trading and will let you miss trades.


Good luck with your endeavour.




Quote from Veyron 16.4:


No one to date (that I know of, or have read) has even tried to link the ratios as I plan to do. No one. If you can point me to a link containing such a public declaration, I'd be more than happy to read it. :)
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