Tools to measure and draw on the graphs.In order to use the ABCD pattern in the best possible way, you’ll need several things: It’s akin to blind climbing – you are welcome to climb as high as you want, but you also need to know where to stop. But don’t wait too long – once the very first reversal candlestick appears, the number of willing buyers/sellers will increase dramatically, which will in turn increase/decrease the price very fast. However, if you see that the resistance level is not yet reached, you can try to wait a bit longer. That’s why you can safely draw CD in 1:1 proportion and under the same angle as AB. It can be longer, but almost never shorter. On the real ABCD chart pattern, the CD line is almost equal to AB. That’s why opening a position at D is the most effective way of working with this pattern, even though no one forbids you to enter earlier.įinding the exact position of D can be hard, but you only need to enter either right on it or just before the top. After that, you can expect the price to drop (if ABCD was bullish) or rise (if ABCD was bearish) for some time. At this point, the price has hit the maximum resistance possible and won’t have more growth. When the trend stops at D, it’s going to enter a reversal. CD is usually as long as AB is, although it’s not uncommon for it to be longer. This point must be higher than A but lower than B, otherwise, the pattern is not true At C, another price surge starts to mount, as participants are reassured that the trend is still going.If the pattern is true, BC will be shorter than AB by ½ to ¾ At B, the traders start to doubt and drop the price a bit.At A, it starts to experience a price surge, for one reason or another.The logic behindĪs you can see from the pattern itself, it reflects the general mood of the market: The ABCD pattern usually takes about 2 weeks for candlesticks to develop, which is why it’s a relatively short-term pattern that can be taken advantage of in a short span of time. These lines simply show trends – from low to high to low to high (if the overall trend is growing).Įach smaller trend is a collection of candlesticks, most of which move in the same direction (up or down). The lines you can draw are hypothetic – you won’t likely see anything like that on a pure market graph. In this instance, the lines create a zigzag shape that ends either with massive elevation or a massive downfall from A to D. If you’re familiar with geometry, you’ll notice that the ABCD pattern sounds like a collection of lines with four points connect these lines. But remember this: you should judge the situation by more than one parameter as patterns such as ABCD aren’t always right. It’s one of the standard short-term patterns, so it is good to remember it. The logic behind that is that the collective behavior of the traders on a particular market always returns to making the same decisions.ĪBCD stock pattern is one of the market patterns that reflect such common decisions. The common practice is to spot them, make sense of them, and make sure you don’t miss them in the future. Patterns in this context are peculiar recurring trends.
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