Crab and Deep Crab Harmonic pattern
Other harmonic patterns like crab and deep crab are based on distinctive Fibonacci ratios that set them apart from one another.
Although it is not a brand-new pattern, it was found in 2001. Because it uses the Fibonacci retracement and extensions naturally occurring chart pattern. It is also employed regularly in modern times because of its natural behavior. Both now and in the future, natural patterns will continue to function.
There are four to five specific Fibonacci ratios used in each harmonic arrangement. It will be simple for you to recognize a harmonic pattern on the price chart by simply looking at the chart if you have mastered all the harmonic patterns. Fibonacci ratios are significant, although the names of these patterns are not.
Crab and deep crab patterns are divided into two sorts each depending on the price/market orientation.
- Bullish Crab Pattern
- Bearish Crab Pattern
- Bullish Deep Crab Pattern
- Bearish Deep Crab Pattern
How to recognize a Crab Pattern
A lengthy CD wave makes up the four-wave and five-point (XABCD) harmonic chart pattern. The long CD leg is an abrupt move that targets retail traders’ stop losses before reversing to the main direction.
Keep in mind that a sudden move in the market following a period of consolidation or sideways movement is usually a trap.
The market can be moved by powerful merchants or banks. They oppose your achieving success. To get rid of the retail traders, they employ a stop loss hunting approach that involves a swift market movement. in order to steer the market in that direction. CD leg provides an indication for stop-loss hunting.
Let me now go over the guidelines for spotting the crab pattern in the market. The Fibonacci ratios utilised in the crab design are part of the rules.
Bullish Crab Pattern
- It extends to point A from point X where it begins. Point X can be located anywhere on the price chart, but it is wise to seek for a bull pattern when the market is oversold.
- Wave AB needs to retrace downward to the XA wave’s 38.2–61.8 Fibonacci levels.
- Wave BC needs to retrace to the AB wave’s 38.2-88.6 Fibonacci levels.
- The longest wave is the final CD wave, which must reach the BC wave’s 224–361 Fibonacci levels.
Bearish Crab pattern
- It starts from point X and goes all the way to point A. In overbought circumstances, this pattern should manifest.
- Wave AB needs to retrace higher to the 38.2–61.8 Fibonacci levels of the XA wave.
- Wave BC must retrace to the 38.2–88.6 Fibonacci levels of the AB wave.
- The last wave CD must reach the BC wave’s 224–361 Fibonacci levels.
How to recognize Deep Crab pattern
It is a deep wave retracement-based version of a crab pattern. The retracements in this pattern are always substantial, reaching the 88.6 Fibonacci level. The extension levels won’t change.
To find a bullish deep crab pattern on the chart using technical analysis, follow the guidelines below.
- The deep crab pattern’s initial wave, XA, must be a bullish wave.
- The 88.6 fibonacci level of the XA wave suggests a deep retracement that AB must make.
- The BC wave must also retrace to the AB wave’s 88.6 fibonacci level.
- The CD wave should continue until the XA wave’s 161.8 fibonacci extension level.
All of the elements in the bearish deep crab pattern will be the same as those in the bearish crab pattern, with the exception of the retracement of the AB and BC waves. In the event of deep crab, retracement must reach the 88.6 Fibonacci level.
Major differences between the Crab and Deep Crab patterns
- The BC leg does not project quite as much as the crab does.
- B must have a retracement of at least 88.6%. It is normal to move above or below 88.6 percent of the retracement level without exceeding X
- The deep crab pattern depends heavily on variations of the AB=CD pattern.
- The BC leg has a minimum percentage of 224 percent and a maximum of 361.8 percent.
How to identify the Crab & Deep Crab patterns?
Understanding the Fibonacci retracement and extension numbers in a crab pattern can be challenging. Additionally, sketching the crab design while using the Fibonacci tool to measure each leg might grow tiresome.
In addition to the basic guidelines of the crab pattern, traders can scan the market for the following indications by examining the lows and highs and merely tracking price movement.
- The XA leg contains the majority of the BC leg.
- In a bullish crab pattern, C is the lower high compared to A, while in a bearish crab pattern, C is a higher low compared to A.
- In a bearish crab pattern, B makes a lower high than X, or in a bullish crab pattern, B makes a higher low than X.
- The extreme, D, denotes a lower low or higher high that is greater than X.
What does the Crab and Deep Crab harmonic pattern tell traders?
It can aid traders in determining when a current price move is probably nearing its end, just as the butterfly. As a result, traders might enter the market as the price begins to move in the other direction.
The overbought and oversold levels represented by the crab and deep crab are significant, and the subsequent reaction is typically swift and sharp. Many experts and traders believe that of all harmonic patterns, the crab pattern and deep crab represent some of the quickest and most lucrative patterns.
How to trade when you see the pattern?
Trading a bearish Crab pattern
At point D, place a short (sell) order to trade a bearish crab pattern (the 161.8 percent Fibonacci extension of the XA leg).
- Entry: Determine the location at point D where the pattern will stop, then place your order there.
- Stop-Loss: Position your stop-loss directly beneath point D.
- Take Profit: Depending on your goals and the state of the market, your profit target’s location will be very subjective. Place it at pattern point A if you want to make an aggressive profit. Placing it at point B will yield a more cautious profit.
Trading a bullish Crab pattern
To detect the pattern, first, select the crab pattern charting tool and adhere to the aforementioned guidelines. To trade the crab pattern, keep in mind how crucial the Fibonacci ratios are. If you see a pattern on a price chart and the ratios don’t match the pattern’s specifications, the pattern is invalid. Don’t trade that pattern, then.
Enter for a buy as soon as the price movement supports the pattern. If you are a cautious trader, make sure to hold off on entering the trade until there have been a few bullish confirmation candles.
The take-profit order of the crab pattern has four targets: X, B, C, and A. At first, traders try to take their entire profit at point A, but the market shifts sideways when the price passes point B. As a result, take half of your profit at point B before closing all of your positions at point A.
Crab pattern vs. Butterfly pattern
The butterfly pattern has a swing point D that terminates at the 127.2 percent Fibonacci extension of the XA leg, which is one of the two fundamental differences between the butterfly design and the crab pattern. Additionally, the butterfly pattern goes back to the 78.6% of the prior XA leg.
However, if you take into account the crab pattern, the swing point D terminates the AB leg between 38.2 percent and 61.8 percent and at the 161.8 percent extension of the XA leg. The crab pattern and the butterfly pattern are distinct from one another due to these two key variances in the Fibonacci ratios.
Fibonacci levels have a natural tendency to generate harmonic patterns. They are frequently utilised by retail traders and are effective when used correctly and with risk management. Without controlling risk, trading will not be profitable for you.