Cypher Advanced formation Tools: *Fibonacci retracements (38.2% , 61.8% and 78.6%) *Fibonacci extension (127.2% and 141.4%) Timeframes: *The Cypher Advanced formation was originally designed as a swing trading strategy. But it also works on lower timeframes. Tactics: *Seek to identify 4 market moves and 3 major Fibonacci zones. The combination of these moves forms the points (X, A, B, C, D) that fulfill the formation. Rules of engagement: Criteria 1 The Cypher Advanced formation starts with a market movement/impulse leg that establishes our X and A points. Once X and A points have been identified, we then look for our first criteria. Criteria 1: The market forms the B completion point by fulfilling at least a 38.2% retracement of the XA leg. Note: AB move remains valid as long as there is at least a 38.2% retracement of XA and that it does not have a candle close past 61.8% of XA. A candlewick can go to whatever level here. Only a candle close is important as maximum allowed B. Rules of engagement: Criteria 2 If criteria 1 has been met, then look for criteria 2. Criteria 2: The market forms the C completion point by fulfilling at least a 127.2% retracement of the XA. Note: BC move remains valid as long as there is at least a 127.2% retracement of XA and that it does not have a candle close past 141.4% of the XA. A candlewick can go to whatever level here. Only a candle close is important as maximum allowed C. Rules of engagement: Criteria 3 If criteria 1 and 2 have been met, then look for criteria 3. Criteria 3: The market forms the D completion (entry point) by fulfilling a 78.6%extension of XC. Note: D point must go past B. If it doesn’t then the formation is invalidated Trade management: Entry, stops & targets. Entry: Limit order is placed at D completion point. Target 1: 38.2% retracement of CD leg. When attained half of the position closes & stop moves to breakeven. Target 2: 61.8% retracements of CD leg. Stop placement: Stop always goes past X. Either 113% XA extension or 1 ATR beyond X, or 78.6% of the 1st target distance above/below the entry.
@dragm97, It wasn't a loser. It hit my targets at the next bar spike to the downside.
patterntrader
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One of the problems with harmonic trading is that those who follow this system are really "fundamental" and rigid. I am not blaming the system, but need to find a balance.
Alexander_Nikitin
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@patterntrader, Well, maybe it's true about harmonic patterns but cypher isn't a harmonic pattern.:) It is an advanced formation. Very big difference. Especially the execution of the trades.
mat.szarek
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I`ve spoted this Cypher a little bit late and entered at 114.180. Discount! :D