Butterfly Pattern Completed
Updated
Butterfly Advanced formation
Tools:
*Fibonacci retracements (38.2% and 78.6%)
*Fibonacci extension (127.2%)
Timeframes:
*The Butterfly 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 Butterfly 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 78.6% retracement of the XA leg.
Note: AB move remains valid as long as there is at least a 78.6% retracement of XA and that it does not extend past X. Only candlewick is calculated here. Candle close is not important.
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 38.2% retracement of the AB.
Note: BC move remains valid as long as there is at least a 38.2% retracement of AB and that it does not extend past A. Only candlewick is calculated here. Candle close is not important.
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 127.2%extension of AB.
Note: D point always extends past X.
Trade management: Entry, stops & targets.
Entry: Limit order is placed at D completion point.
Target 1: 38.2% retracement of AD leg. When attained half of the position closes & stop moves to breakeven.
Target 2: 61.8% retracements of AD leg.
Stop placement: As the entry is beyond X in this pattern then stop is 2*ATR +/- the D or 1 to 1 measured distance to the first target.
Tools:
*Fibonacci retracements (38.2% and 78.6%)
*Fibonacci extension (127.2%)
Timeframes:
*The Butterfly 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 Butterfly 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 78.6% retracement of the XA leg.
Note: AB move remains valid as long as there is at least a 78.6% retracement of XA and that it does not extend past X. Only candlewick is calculated here. Candle close is not important.
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 38.2% retracement of the AB.
Note: BC move remains valid as long as there is at least a 38.2% retracement of AB and that it does not extend past A. Only candlewick is calculated here. Candle close is not important.
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 127.2%extension of AB.
Note: D point always extends past X.
Trade management: Entry, stops & targets.
Entry: Limit order is placed at D completion point.
Target 1: 38.2% retracement of AD leg. When attained half of the position closes & stop moves to breakeven.
Target 2: 61.8% retracements of AD leg.
Stop placement: As the entry is beyond X in this pattern then stop is 2*ATR +/- the D or 1 to 1 measured distance to the first target.
Note
A remarkable thing about butterflies and gartlies. Due to their 1.272AB completion point if they work there's ALWAYS a potential cypher pattern setting up back to back!! ^)Note
Of course, the previous comment is true if the C-point doesn't have a candle close past 0.618AB
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