or both the bullish and bearish versions of the ABCD chart pattern, the lines AB and CD are known as the legs while BC is called the correction or retracement.
If you use the Fibonacci retracement tool on leg AB, the retracement BC should reach until the 0.618 level. Next, the line CD should be the 1.272 Fibonacci extension of BC.
Simple, right? All you have to do is wait for the entire pattern to complete (reach point D) before taking any short or long positions.
Bearish ABCDBullish ABCD
Oh, but if you want to be extra strict about it, here are a couple more rules for a valid ABCD pattern:
The length of line AB should be equal to the length of line CD.
The time it takes for the price to go from A to B should be equal to the time it takes for the price to move from C to D.
If you use the Fibonacci retracement tool on leg AB, the retracement BC should reach until the 0.618 level. Next, the line CD should be the 1.272 Fibonacci extension of BC.
Simple, right? All you have to do is wait for the entire pattern to complete (reach point D) before taking any short or long positions.
Bearish ABCDBullish ABCD
Oh, but if you want to be extra strict about it, here are a couple more rules for a valid ABCD pattern:
The length of line AB should be equal to the length of line CD.
The time it takes for the price to go from A to B should be equal to the time it takes for the price to move from C to D.