But what exactly makes this one special?
Is it the fact that you can use it across various financial markets? Or the fact that it’s an easy-to-use strategy?
Find out all about the Bearish Cypher pattern below.
What is a Cypher Pattern?
As we mentioned earlier, the Cypher pattern is a five-point Harmonic pattern and a commonly used reversal strategy.
It focuses on describing the highs and lows of a security as well as revealing the trends of the market.
Although unpopular, it remains to be a very reliable and beginner-friendly strategy.
What is a Bearish Cypher Pattern?
Just like all the other harmonic patterns, a bearish or bullish cypher pattern may arise.
Let’s focus on the downward patterns for now.
The bearish Cypher pattern target is known to be a downward price movement and a signal to buy. It acts as a support and resistance level for your investments.
This pattern indicates the great possibility of prices falling within a short period of time. And allows investors to take advantage of the situation and profit from it.
It resembles the letter W and is focused on points X, C, and D. And opens with leg XA.
How To Identify a Bearish Cypher Pattern?
Aside from resembling the letter W, the bearish Cypher pattern makes its high at point X and its low at point C. It ends on the rising point D and indicates an incoming plummet.
And just like all harmonic patterns, these also use Fibonacci numbers and ratios.
This is where the bearish cypher pattern rules come from. For a pattern to be bearish, it must follow these rules:
- A retracement range of 38.2% to 61.8% should be observable from points XA moving to point B
- Point C must have an extension of 113% to 141% to points XA
Example of a Bearish Cypher Pattern
The Cypher pattern success rate depends on a bearish and bullish Cypher pattern target.
Trading a bearish pattern requires traders to take their positions once point D reveals itself.
If the market prices go against the predictions of the Cypher pattern, a trader may either wait for the pattern to fully develop or not enter the trade.