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# Trading Harmonic Patterns with Divergence

AnalyticsTrade Team Last updated on 8 May 2023

## What is Harmonic Trading?

Harmonic trading is a method of technical analysis that uses Fibonacci ratios to identify potential reversal points in the financial markets. It is based on the idea that price movements in the financial markets are not random, but instead follow certain patterns. These patterns are known as harmonic patterns and can be used to identify potential reversal points in the market.

## What is Divergence?

Divergence is a term used to describe when the price of an asset and an indicator move in opposite directions. This can be used to identify potential reversals in the market. For example, if the price of an asset is moving higher, but the indicator is moving lower, this could be an indication that the trend is about to reverse.

## How to Trade Harmonic Patterns with Divergence

Trading harmonic patterns with divergence is a popular trading strategy among Forex traders. The idea behind this strategy is to identify potential reversal points in the market by looking for divergences between the price of an asset and an indicator.

### Step 1: Identify a Potential Reversal Point

The first step in trading harmonic patterns with divergence is to identify a potential reversal point. This can be done by looking for divergences between the price of an asset and an indicator. If the price of an asset is moving higher, but the indicator is moving lower, this could be an indication that the trend is about to reverse.

### Step 2: Identify a Harmonic Pattern

Once a potential reversal point has been identified, the next step is to identify a harmonic pattern. Harmonic patterns are formed when the price of an asset moves in a certain pattern. These patterns can be identified by looking at the Fibonacci ratios of the price movements.

### Step 3: Enter the Trade

Once a harmonic pattern has been identified, the next step is to enter the trade. This can be done by placing a buy or sell order at the point where the harmonic pattern is formed.

### Step 4: Place a Stop Loss and Take Profit Order

The final step in trading harmonic patterns with divergence is to place a stop loss and take profit order. A stop loss order should be placed at a level where the trade will be closed if the price moves against the trader. A take profit order should be placed at a level where the trade will be closed if the price moves in favor of the trader.

## Conclusion

Trading harmonic patterns with divergence is a popular trading strategy among Forex traders. This strategy involves identifying potential reversal points in the market by looking for divergences between the price of an asset and an indicator. Once a potential reversal point has been identified, traders can then look for harmonic patterns in the price movements. Once a harmonic pattern has been identified, traders can then enter the trade by placing a buy or sell order at the point where the harmonic pattern is formed. Finally, traders should place a stop loss and take profit order to protect their capital and maximize their profits.

## Personal Opinion

I believe that trading harmonic patterns with divergence is a great way to increase your chances of success in the Forex market. This strategy can be used to identify potential reversal points in the market and can help traders to enter trades at the right time. However, it is important to remember that no trading strategy is foolproof and that losses can still occur. As such, it is important to always use risk management techniques such as stop loss and take profit orders to protect your capital.

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