Several types of Harmonic pattern indicator and Harmonic Pattern scanner used in Forex and Stock trading. Manual detection of Harmonic Patterns are tough and inefficient. Hence, it is convenient to use the automated Harmonic Pattern Detection Indicator or Scanner. However, not all the harmonic pattern indicators and scanners are the same. In the past the main variations of Harmonic pattern indicators can be categorized as following three different types.
Type 1: Non lagging (fast signal) but repainting – option to enter from turning point. Indicator does not show the failed pattern in chart and last pattern can repaint.
Type 2: Lagging (slow signal) but non repainting – no option to enter at turning point. Indicator does not show the failed pattern but last pattern does not repaint.
Type 3: Detecting pattern at point C but repainting – option to enter at turning point. Indicator detect pattern too early and you have to wait until the point D. Pattern may not achieve point D. Indicator does not show the failed pattern and last pattern can repaint.
Type 1. Non lagging (fast signal) but repainting
First type is non lagging but repainting harmonic indicators. This sort of Harmonic pattern indicator is the typical harmonic pattern indicators used by many traders. The advantage is that you do get the signal early as possible. You have an opportunity to trade from the turning point all the ways down to the continued trend. The disadvantage is that you are not able to test your strategy in chart because this type of harmonic pattern indicator does not show the entry of the failed patterns in chart but only successful one. In fact, Harmonic Pattern Plus and Harmonic Pattern Scenario Planner are under this category. They would provide the fastest signal but you will not able to test your strategy in your chart because they do not show the failed entry in chart.
Type 2. Lagging (slow signal) but non repainting
The second type is that lagging but non repainting. Some people use pretty words like minimal lag Harmonic pattern indicator or etc. But really lagging is just lagging. You can not make it really pretty though. As the literal meaning of lagging indicates, this type of harmonic pattern indicators provide you the lagging signal comparing to the first type. It will only provide you the signal after some times passed the turning point. Hence, you do not have an option to consider your entry from turning point. Depending on the pattern size, sometimes, the lagging can be only several bars but it can range up to several dozens of bars like 30 or 60 bars. Sometimes, your entry might be at the first reversal after the turning point. Hence you have be careful with this sort of entry. The advantage is that you will not experience repaint with the latest pattern though. I am not sure if non repainting property can offset the disadvantage of lagging signals because professional harmonic pattern traders are looking for the turning point entry.
Type 3. Detecting pattern at point C but repainting
The third type is that detecting pattern at C point completion not at D point completion. This type of Harmonic pattern indicator do exists. This type of Harmonic Pattern indicators detect patterns way too early at the point C. For this reason, you have to wait quite some time to trade at point D. If you are trade on higher time frame like H1 or H4 or D1, you might have to wait at least half days to several days. You might run out of your patience quickly with this type of Harmonic Pattern indicator by just waiting and waiting. Since, it is detecting pattern at point D, you are not able to see any failed entry in your chart either. So it does repaint. What is worse is that the pattern can be disappeared while you have been waiting some time. You are just wasting your time in this case.
Some people asked me if they can trade from point C to D. The answer is no because we only recommend to trade with patterns if we can study the outcome of the patterns. Since Harmonic patterns are the study of trading on point D not on the point C, it is not wise to use point C as your trading point.
By summarizing above three types of harmonic pattern indicator, we can draw some interesting conclusion. Non lagging means repainting and lagging means non repainting. There seems to be some balance between fast signal and repainting issues. It might be the universal or physical law.
4. Main limitation of Harmonic Pattern Trading for Starter
The main limitation of Harmonic pattern trading is that the indicator or scanner does not show the failed patterns in chart because they are repainting (Type 1). In fact, no harmonic pattern indicator or scanner in Type 1 category show the failed pattern as well as successful pattern. This makes it difficult to estimate the trading performance of the Harmonic Pattern Strategy. For example, because Harmonic pattern indicators (Type 1, 2 and 3) show only successful patterns in chart, some people take the succesful patterns only as the success rate of the Harmonic Pattern Trading. The success rate is biased. The figure often looks like the success rate of 80% or 85% or something. This is not the true success rate of the Harmonic Pattern.
There are many failed Harmonic patterns in real world and they are just not shown in chart due to this repainting issue. Then why harmonic pattern indicator or scanner do not show the failed patterns in chart? Is it because we want to hide the failed patterns in the intention to show some false information to trader? Answer is no and never. We are all honest people. Simply it was considered as being impossible technically to create such a pattern detection algorithm showing failed patterns and successful patterns in chart together.
So the reason was simply because of the limitation of technology. For example, we are still miles away from creating 100% hydrogen powered vehicles. This is simply because our technology is not mature enough to create such a car. This is nothing to do with any moral integrity of car manufacturer, etc. We just do not have the technology yet. That is all.
Experienced Harmonic pattern traders get used the repainting Harmonic pattern indicators as in Type 1, because no such a tool showing failed historical pattern in chart anywhere. Then they just use their experience to fill the missing information about the failed patterns.
For starters, however this makes difficult to visually understand and test strategy with the harmonic patterns from chart. They have to rely on external source to learn strategy. It would be much nicer for them if they can trade as how the historical harmonic patterns in the chart performed. Then they do not have to concern too much if their strategy will fail or successful.
With the repainting Harmonic Pattern Indicator, this is hard for starters. Sometimes, starters believe that harmonic pattern indicator provides the success rate that was counted from successful patterns only in chart like 90% success rate or something as they do not know that harmonic pattern indicator (Type 1, 2 and 3) does not show failed patterns in chart. This should be not the right motivation to get involved with harmonic pattern trading. The right rationale to trade with harmonic pattern is that you have an option to trade from turning point, which provides you faster entry than other strategy. In addition, the Harmonic Pattern with the Pattern Completion Zone provides an excellent risk management too.
Now the question, can we have non lagging and non repainting harmonic pattern indicator showing failed historical patterns in chart? This question means that can we push the technological limitation to overcome such a barrier ? The answer is yes. We have broken the critical technological barrier. Now you can have non repainting and non lagging harmonic pattern indicator giving you the true success rate in your chart.
This would be great guidance and trading resource on its own. Because you can easily learn how to use pattern together with other technical and fundamental tools, this would relieve strategy concern for all harmonic pattern trader. You have to remember that non repainting and non lagging harmonic pattern indicator is superior than above three pattern indicators (Type 1, 2 and 3). However, because non repainting and non lagging harmonic pattern indicator shows failed patterns in chart, you might get the opposite perception. Please don’t. Repainting or lagging harmonic pattern indicator (Type 1, 2 and 3) will have equally bad or even more number of failed patterns comparing to non repainting and non lagging one.
For your advantage, it is always better to work with the indicator giving you the realistic success rate for your trading. Then you will quickly learn how to improve your trading. In long run, non repainting and non lagging harmonic pattern indicator is definitely good one to stick with. You can add extra filter or other secondary confirmation. These efforts are real because you can measure the realistic outcome with non repainting and non lagging indicator. Remember that you can readily find out the true winning system with non repainting and non lagging harmonic pattern indicator whereas it is very hard for repainting or lagging indicators (Type 1, 2 and 3).
5. Can we have non lagging but non repainting Harmonic pattern Indicator?
The answer is yes. This is the next generation of Harmonic pattern indicator which was born from the intensive scientific research. We shipped the technology to X3 Chart Pattern Scanner.
This type of non repainting and non lagging indicator will provide you the fastest signal entry like first type of harmonic pattern indicator. At the same time, it will show you the failed entry in your chart. Hence you can build your strategy in your chart with other technical indicators at ease or even in backtesting mode. Since you trade as you see from chart, the confidence for your trading will increase dramatically. This is the true hybrid of all above three types of harmonic pattern indicators. With little bit of knowledge on Pattern Completion Interval, you could take the entry at your favored risk to rewards ratio. We also provide Potential Continuation Zone to perfect your harmonic pattern trading. You can watch the video below for more information.
As a new and advanced product, X3 Chart Pattern Scanner can be little expensive if your pocket is thin. X3 Chart Pattern Scanner is the non repainting and non lagging Harmonic Pattern tool, which you can trade what you see from the chart with the true success rate. However, if you do not mind the repainting Harmonic Pattern Detection Indicator, you can still get the excellent Harmonic Pattern tools at affordable price. For example, Harmonic Pattern Plus can detect the Harmonic Pattern with good success rate. Pattern locking and unlocking feature in Harmonic Pattern Plus is also powerful. At the same time, it will provide tons of other powerful features. You can have a look at the main features of Harmonic Pattern Plus below.
11 Harmonic Pattern Detection
Automatic stop loss and take profit recognition for superb risk management
Pattern Completion Zone detection for trading
Potential Continuation Zone detection for future price prediction
Potential Reversal Zone detection for Point D identification
52 Japanese Candlestick Pattern Detection (optional to use, you can swtich on and off)
Automatic Channel Detection to go with Harmonic Pattern (Optional to use, you can switch on and off)
Multiple timeframe Pattern Detection across all timeframe
Guided Trading Instruction for professional traders
Pattern Locking and Unlocking feature in your chart
Even more, please find it out.
Below is the landing page for Harmonic Pattern Plus for MetaTrader 4 and MetaTrader 5.
Please understand that it took nearly 5 years of work to bring this technology. That was really hard work. Probably, it was the same thing as one average person tries to build satellite or spaceship on their own. This was just born from many years of ground hitting with various algorithm. Now we hope we can guide many price pattern traders for the right and better practice.