Srading.com

Menu
  • Home
  • Markets
    • Forex
    • Stock
  • Fundamental Analysis
    • Economics
    • Money & Banking
  • Technical Analysis
    • Drawing Tools
    • Chart Patterns
  • Tools
    • Online Charts
    • Economic Calendar
    • Interest Rate Today (Live Widget)
    • Forex Market Hours
    • Currency Indexes Chart
    • National Holiday Calendar
    • CoT Chart
    • Quotes

RISK WARNING: Trding financial assets come with a high risk of losing money. So, everything you read on this website is for educational purposes or personal opinions only

Read our DISCLAIMER
Home
Technical Analysis
Chart Patterns
ABCD Pattern: Trading Strategy and Examples
Chart Patterns

ABCD Pattern: Trading Strategy and Examples

December 7, 2022 Zafari

ABCD pattern is a large reversal price chart structure that can be both bearish and bullish. This pattern is the same as the corrective wave in the Elliott Wave Theory. Those who do not follow Elliott Waves study this pattern separately. 

ABCD pattern is also known as Measured Move and Swing Measurement. In the past, investors called it Measured Move, and mostly now they call it the ABCD pattern.

Here is how the bullish ABCD pattern forms.

  • The first leg starts from the bottom of a downtrend (point A) and then rises but does not reach or exceed the beginning of the downtrend (point B). This is the AB leg.
  • Next, the price falls but does not reach the A level (point C). Generally, it falls to 50% – 61% of the AB height. This is the BC leg or correction.
  • Finally, the price rises and exceeds the B level reaching point C. And it is the last point that makes the CD leg.

In this pattern, generally, the leg AB = CD. However, it is not a must to be exactly the same. A slight difference should be ignored.

Bullish ABCD Pattern definition

An ABCD pattern completes only if the price is reversed from point C.

On the other hand, the bearish ABCD pattern is the opposite way of the bullish version.

Here is an image that shows its structure.

Bearish measurement move pattern definition

Trading Strategy of the ABCD Pattern

From the Elliott Wave Theory perspective, the entire ABCD pattern is a correction that starts after a spike.

So, to make sure that it is a correction, the slope of the formation should not be as steep as the prior trend.

In other words, without consideration of the positivity and negativity of slopes, the correction wave should have less slope than the spike.

So, make sure that it is an ABCD pattern. Just AB = CD does not mean that it is an ABCD pattern. It should reverse from point C.

Then, when you are sure this pattern exists, look for confirmations such as technical indicators and chart structures.

Finally, based on smaller patterns and confirmation place your trade. Candlestick patterns around point C are very helpful. So, look at them.

Put a stop loss below point C in a bullish ABCD and above the C level in a bearish ABCD pattern.

Your take-profit should be at least from the C to the A level or adjust as new formations appear.

ABCD Pattern Examples

This article provides you with four examples, two from each version.

Example #1

The daily chart of AUDJPY made an ABCD pattern from early September to early November 2020.

A bullish ABCD pattern example
AUDJPY chart by TradingView

A shooting star candlestick stops the uptrend which is point A. Then, it falls and is stopped by an inverted hammer, marked as B. Next, the price starts rising to reach C where two candles make a bearish harami pattern. Finally from point C, the price drops to point D where the chart makes a bullish engulfing pattern.

The new uptrend started from point C and continued rising. In the middle, it made a flag in the daily chart, and this flag is another bullish ACBCD pattern in the 4-hourly chart.

An aggressive trader may buy after the completion of the bullish engulfing. And a conservative trade may wait longer for the price to cross the resistance line of the pattern and wait for a confirmation. In both cases, this pattern was a good opportunity.

Example #2

A bearish ABCD pattern appeared in the daily chart of gold from mid-July to mid-October of 2015.

gold price chart made a bearish ABCD pattern
Gold Chart by TradingView

The above pattern started with a symmetrical triangle and ended at point D with a long-legged doji.

From the last point (D) the price dropped below the A level, made a rounding bottom, and changed direction.

The above pattern is a clear example and does not need more explanation.

Share
Tweet
Linkedin
Pinterest
Reddit
Email
Prev Article
Next Article
Tags:Forex Pattern Stocks Technical Analysis Trading

Related Articles

Spinning Top Candlestick Patterns (Strategies & Examples)
A spinning top is a single candlestick that has a …

Spinning Top Candlestick Patterns (Strategies & Examples)

Morning Star Pattern (Strategies & Examples)
What is a Morning Star Pattern? The morning star is …

Morning Star Pattern (Strategies & Examples)

Flag Pattern: Types, How to Trade & Examples
The flag pattern is a continuation structure appearing on any …

Flag Pattern: Types, How to Trade & Examples

Dumpling Top Pattern & Frypan Bottom Pattern (Strategies & Examples)
The dumpling top pattern is a bearish candlestick reversal structure. …

Dumpling Top Pattern & Frypan Bottom Pattern (Strategies & Examples)

Triple Top Pattern: How to Trade and Examples
A triple top pattern is a reversal chart structure having …

Triple Top Pattern: How to Trade and Examples

Belt Hold Candlestick Patterns (How to Trade & Examples)
Belt hold candlestick patterns are single candle reversal structures. It …

Belt Hold Candlestick Patterns (How to Trade & Examples)

About The Author

Zafari

Zafari is a professional trader and has been in the financial market since 2014. He has a bachelor of public economics and an MBA. For some reason, he does not show his face. And he loves you all!

Leave a Reply Cancel Reply

  • Recent
  • Popular
  • Comments
  • Tags

Srading.com

QUICK LINKS

  • About
  • Cookies Policy
  • Terms & Conditions
  • Disclaimer
  • Privacy Policy
  • Contact Us

LATEST POSTS

  • Elliott Wave Theory Guide for Beginners
  • Top Continuation Candlestick Patterns
  • Top Reversal Candlestick Patterns
  • 6 Popular Continuation Patterns & How to Trade
  • 8 Popular Reversal Patterns and How to Trade Them

FOLLOW US ON SOCIAL MEDIA

  • Facebook
  • Twitter
  • LinkedIn
  • Instagram
  • Pinterest
  • Telegram
  • Reddit
  • YouTube

Trading financial assets are risky. Everything you read on this website is just for educational purposes or personal opinions only. Read our DISCLAIMER!

Copyright © 2023 Srading.com

Ad Blocker Detected

Our website is made possible by displaying online advertisements to our visitors. Please consider supporting us by disabling your ad blocker.

Refresh
We use cookies on our website to give you the most relevant experience by remembering your preferences and repeat visits. By continuing this website or clicking “Accept”, you consent to the use of ALL the cookies.
Do not sell my personal information.
Cookie SettingsAccept
Cookies Policy
Manage consent

Privacy Overview

This website uses cookies to improve your experience while you navigate through the website. Out of these, the cookies that are categorized as necessary are stored on your browser as they are essential for the working of basic functionalities of the website. We also use third-party cookies that help us analyze and understand how you use this website. These cookies will be stored in your browser only with your consent. You also have the option to opt-out of these cookies. But opting out of some of these cookies may affect your browsing experience.
Necessary
Always Enabled
Necessary cookies are absolutely essential for the website to function properly. These cookies ensure basic functionalities and security features of the website, anonymously.
CookieDurationDescription
cookielawinfo-checkbox-analytics11 monthsThis cookie is set by GDPR Cookie Consent plugin. The cookie is used to store the user consent for the cookies in the category "Analytics".
cookielawinfo-checkbox-functional11 monthsThe cookie is set by GDPR cookie consent to record the user consent for the cookies in the category "Functional".
cookielawinfo-checkbox-necessary11 monthsThis cookie is set by GDPR Cookie Consent plugin. The cookies is used to store the user consent for the cookies in the category "Necessary".
cookielawinfo-checkbox-others11 monthsThis cookie is set by GDPR Cookie Consent plugin. The cookie is used to store the user consent for the cookies in the category "Other.
cookielawinfo-checkbox-performance11 monthsThis cookie is set by GDPR Cookie Consent plugin. The cookie is used to store the user consent for the cookies in the category "Performance".
viewed_cookie_policy11 monthsThe cookie is set by the GDPR Cookie Consent plugin and is used to store whether or not user has consented to the use of cookies. It does not store any personal data.
Functional
Functional cookies help to perform certain functionalities like sharing the content of the website on social media platforms, collect feedbacks, and other third-party features.
Performance
Performance cookies are used to understand and analyze the key performance indexes of the website which helps in delivering a better user experience for the visitors.
Analytics
Analytical cookies are used to understand how visitors interact with the website. These cookies help provide information on metrics the number of visitors, bounce rate, traffic source, etc.
Advertisement
Advertisement cookies are used to provide visitors with relevant ads and marketing campaigns. These cookies track visitors across websites and collect information to provide customized ads.
Others
Other uncategorized cookies are those that are being analyzed and have not been classified into a category as yet.
SAVE & ACCEPT