One of the most challenging issues novice Traders have faced time and time again is to decide whether to buy or sell their position and pinpoint when is the best time to do what. The catch is simple, buy at the lowest price possible and sell when it peak. But with the extreme volatility of certain market, knowing whether a position is low enough to buy or high enough to sell has proven to be difficult for new Traders.
Thankfully, there’s a simple trick to know and determine the best time to either buy or sell your assets. This simple indicator is a well-known pattern known as the ABCD pattern. This is one of many ways you can indicate how the market is going through technical analysis.
An ABCD pattern is a common pattern reflecting the rhythmic style of how the market moves. It is comprised of three continuous price swings or trends that look similar to a lightning bolt. An ABCD pattern is helpful because unlike other patterns, this one is pretty common thus giving a more diverse indication.
The pattern can indicate both bullish and bearish market. Their bullish pattern may help you identify when is the best time to buy. Meanwhile, their bearish pattern can help you identify when is the best time to sell. The pattern looks simple with four points on each of their mount. We call this point simply by A, B, C, and D. You know you should buy or sell when the curve reaches point D.
For starters, let’s see how this pattern may appear in general. Below, you can see the difference between an ABCD bullish and bearish pattern.
Now how do you know when the curve reaches its peak or if it already reaches point D right at the momentum? Well, unfortunately there’s no certain science behind it but some traders find that Fibonacci ratio helps a lot when it comes to determine the proportion between AB and CD. If you’re still having trouble even with the ratio, you can broaden the timeframe to check for convergence.
If you can make a habit to determine when the market shows signs of these patterns, then it should be a walk in the park for you. If you’d like to be more strict about it, apply these rules when you try to pinpoint the pattern:
- The length of line AB should be equal to line CD
- How long it takes from point A to B should be equal to C to D
But basically, using this pattern to pinpoint these patterns means you have to learn to wait. Remember, a learning curve will never be easy. The best you can do is to discipline yourself and familiarize yourself with the market.
