Efficient Forex trading system crab pattern

How a popular Crab pattern is drawn and how to trade it

When you start trading you must understand that you are facing a probability process. If they advertise a strategy that yielded 80%-90% of profitable trades previously, it won’t necessarily be as efficient in future. The market is changing all the time; one stage of the cycle is followed by the next one; and to expect that the strategies, performative previously, will be as efficient in future is like buying a pig in a poke. You don’t see how it works but really hope that the purchase will yield you some gains. I believe that the only right way is to select a trading strategy, suitable for you, study it thoroughly, adjust it to yourself and learn to accept losses.

A good example of traders’ adaptation to the changing market is trading harmonic price patterns that I started describing in one of my previous articles. This field of technical analysis aims at spotting the pivot points by means of price patterns and high-probability Fibonacci ratios. At the same time, however high the probability is, there is always a certain risk that the pattern won’t work. The price can quite easily pass through the convergence zone, resulting in losses. Should you get frustrated? Never! First, before you start generating a steady income in Forex, you need to learn to be alright about losses. Second, in trading, like in life, you should have a positive attitude to problems. If you face some troubles, see them as new opportunities. For example, if the price reaches the target of 88.6%, suggested by the Bat pattern, and goes on declining, you can consider that the graphical formation is transforming into the Crab pattern. The pattern retracement levels are about 38.2% -61,8%, and the target point is substantially lower, at a 161.8% Fibonacci of XA leg.

Crab pattern

The pattern transformed in the AUDUSD 4H chart. Supposedly, after the price reaches the target of 88.6% in the Bat pattern and a reversal Head and Shoulders pattern emerges in the convergence zone, you should be focused on purchases. However, the Australian dollar wasn’t increasing in price, and the fact that it couldn't consolidate above 0.7572 indicated the bulls’ weakness.

Crab pattern in AUD/USD chart

The clue was given by the combination of a Three Indians and a Anti-Turtles pattern. It signaled that the upward correction is fading out and the price is likely to continue falling down. Traders, familiar with harmonic patterns, could suggest that the Crab pattern was about to work out.

Three Little Indians and Anti-Turtles on the price correction

A Three Little Indians pattern is good because it allows using different approaches to opening a position, suitable for both aggressive and conservative traders. In case with AUDUSD, it had been unclear for some time, so you could hardly enter a long at a very high level. Another matter was when the price broke out the bottom border of the short-term trading channel. The stop order should have been put at the levels of the correction high. As for the target point, it is, as usual, suggested by harmonic patterns. If you trade Crab pattern, you should get used to the target of 161.8%.

Strategy to trade Crab pattern

 

If you still have doubts, you should look for more evidence, provided by the so-called filters. You can apply indicators. For example, MACD divergence provided more confidence in entering AUDUSD sells.

AUD/USD Divergence in the AUD/USD chart

So, you should never get frustrated. See your troubles as your new opportunities and enjoy your trading.


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Price chart of AUDUSD in real time mode

Trading: How to Prepare a Crab on Forex?

The content of this article reflects the author’s opinion and does not necessarily reflect the official position of LiteForex. The material published on this page is provided for informational purposes only and should not be considered as the provision of investment advice for the purposes of Directive 2004/39/EC.

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