Shark Harmonic Pattern
Retail traders are always going to be small fish in a shark-infested ocean. There are more powerful traders in the market. If you want to learn how to swim with the sharks, get ready to dive into our detailed Shark Harmonic trading strategy.
This is the best Shark Pattern Strategy you can find online.
Our team at Trading Strategy Guides is building up the most comprehensive step-by-step guide into Harmonic trading. We highly advise you start by reading the introduction of the harmonic patterns here, Harmonic Pattern Trading Strategy- Easy Step By Step Guide.
It’s necessary to read the introductory article into the harmonic patterns. This will give you a better understanding of how to trade the Shark Harmonic Pattern.
The Shark pattern may be a relatively new harmonic pattern. In 2011, the pattern was discovered by Scott Carney, but it has the same features as many harmonic patterns. This is because it follows certain Fibonacci ratios for its structure to be validated.
The Harmonic Shark Pattern has some similarities with the Crab harmonic pattern. This is because both of these harmonic patterns shave an overextended point C.
The bullish Shark pattern can be traded on all time frames. But we recommend to only trade the harmonic chart pattern from the 1 hour time frame and above. Below are the trading conditions you want to avoid in the forex market. We also have training on how to profit from trading.
Before we delve deeper into the Shark pattern harmonic trading strategy, let’s look at the indicators needed to successfully trade this strategy.
The advance in technology and the multitude of trading platforms available for traders has made identifying the Shark chart pattern easier.
Many platforms have built-in automated indicators that draw the Shark pattern. This feature helps traders visualize the pattern better. At the same time, make sure that it follows the Fibonacci ratios, as per the rules.
You can find the Harmonic Pattern Indicator on most popular Forex trading platforms (TradingView and MT4) in the indicator section. Here is another strategy called Time-Based Trading Strategy.
Now, let’s move forward and see how to trade the Shark harmonic pattern.
How to Trade the Shark Harmonic Pattern
The Shark trading strategy, like any other harmonic pattern, is a five-leg reversal pattern. It follows specific Fibonacci ratios.
The harmonic Shark pattern differentiates itself from the other harmonic patterns by its five points setup being labeled as O, X, A, B, C. Also, the termination point of leg B ends above wave X. It extends to a minimum of 1.13 and a maximum of 1.618 Fibonacci ratios.
A proper Shark pattern needs to fulfill the following three Fibonacci rules:
- AB= retrace between 1.13 – 1.618 Fibonacci Extension of XA leg;
- BC= extends to 113% Fibonacci extension of 0X leg;
- CD= Poses a target of 50% Fibonacci Retracement of BC leg
Note* the Fibonacci retracement and ratios are at the core of harmonic trading. Make sure the above rules are satisfied before you trade the Shark harmonic pattern.
The Shark pattern is an emerging 5-O pattern as the Harmonic Shark pattern is within the 5-O pattern structure.
The structure of the Shark pattern means that, unlike the other harmonic patterns, all trades are taken based on point C. While the point D is actually used as a pre-defined profit target.
Ideally, the completion point of the CD swing-leg terminates at 50% Fibonacci retracement of BC leg. It must also satisfy the AB=CD condition.
This is the most common way the Harmonic Shark pattern is traded by trying to capture the last move of a complex pattern entering at C. It also has a protective stop loss above/below the 2.24 of AB retracement and targeting the 50% retracement of the BC swing-leg.
Let’s take one step forward and see how you can make money applying the Shark trading rules.
Shark Harmonic Trading Strategy
The way we’re proposing to trade this pattern is to enter at the open of the next candle after our Harmonic indicator has spotted the Shark pattern.
So, to clear up the confusion, as soon as the C-leg is established, we enter the market with a protective stop loss at the 2.618 extension of AB swing-leg.
Step #1 How to Draw Shark Harmonic Pattern
To learn how to draw the Shark pattern simply follow step by step guide – see figure below for a better understanding of the process:
- First, click on the harmonic pattern indicator which can be located on the right-hand side toolbar of the TradingView platform.
- Identify on the chart the starting point 0, which can be any swing high or low point on the chart.
- Once you’ve located your first swing high/low point you simply have to follow the market swing wave movements.
You need to have 4 points or 4 swings high/low points that bind together and form the harmonic crab pattern strategy. Every swing leg must be validated and abide by the Shark pattern forex Fibonacci ratios presented above.
Now, we’re going to lay down the bearish Shark pattern rules.
Note* For the purpose of this article we’re going to use the case for a bullish Shark harmonic.
Step #2: How to Trade Shark Harmonic Pattern: Buy at Point D which should satisfy the requirement CD = 1.13 of OX leg.
The D to X retracement can be anywhere between 0.886 – 1.13. But we prefer taking trades using the ideal 1.13 extension.
The shark pattern has some common characteristics with the Crab pattern because the wave D is a sharp price movement in both harmonic patterns.
The next important thing we need to establish is where to place our protective stop loss.
Step #3: Place the Protective Stop Loss below the 1.150 Fibonacci extension of XA.
The initial protective stop loss should be at 1.150 Fibonacci extension of XA and once the market starts moving toward our first take profit price it should be moved at the completion of D leg.
That’s the logical place to hide your stop loss because any break below will automatically invalidate the Fibonacci requirements for a Shark pattern.
The biggest advantage of trading the Shark pattern is that it requires the use of a very tight stop loss. This is good news as we always want to minimize losses and maximize profits.
The next logical thing we need to establish for the Shark trading strategy is where to take profits.
Step #4: Multiple Take Profit Strategy: TP1 = 50% CD Fibonacci retracement; TP2 = C swing high.
Because of the complexity and the price structure of the Shark pattern we’re going to have two taking profit zones.
The first TP zone is at the 50% Fibonacci retracement CD swing-leg and the 100% retracement for the second TP.
The reason why we use two possible TP zones is because in essence, the Shark pattern leads to the 5-0 pattern (see Figure above) and once we reach the D point it can reverse, however, the Shark pattern can be a reversal pattern in itself and that’s why we’re using as a second target the 100% Fibonacci ratio.
Note: the above was an example of a BUY trade using the Bullish Shark pattern trading strategy. Use the same rules for a SELL trade. In the figure below, you can see an actual SELL trade example using the bearish shark pattern.
Like with any newly discovered pattern we need to be cautious when trading the Harmonic Shark Pattern and only trade the best price structure that fits into all the Fibonacci ratios with deadly precision. You can also read our winning news trading strategy.
The shark harmonic trading strategy works extremely well as a strong counter-trend strategy. You can also learn pretty much fast if the shark harmonic pattern will work or not because it requires immediate price reversal following the chart pattern completion.
Thank you for reading!
Please leave a comment below if you have any questions about the shark trading strategy!