What is Shark Pattern in Trading?

Five waves make up a shark pattern, a form of harmonic pattern that may be discovered in trading by paying attention to the precise Fibonacci ratios for each wave. It differs from other harmonic patterns due to these ratios.

You must comprehend what a “shark” means in trading. A shark is a large animal that consumes little animals in a large body of water in real life. When referring to a trader that eliminates smaller traders via stop-loss hunting in a large market, we use the term “shark.”

Types of Shark Pattern

Based on market direction and Fibonacci ratios, the shark harmonic pattern is further separated into two categories in trading.

• Bullish shark pattern
• Bearish shark pattern

How to find out the Shark Pattern?

Point 0 is where the harmonic shark pattern begins, and point C is where it terminates. The shark pattern is represented by the five points 0XABC. There is a fixed Fibonacci ratio for each wave. We shall stay away from a setup if any single wave is not following specified Fibonacci ratios.

Trading erratic patterns that affect the risk-reward ratio are less significant than waiting for the ideal scenario.

Let’s investigate the shark patterns’ Fibonacci ratios.

Rules to Identify Bullish Shark Pattern

This pattern is predicting the market would move in a bullish direction, as its name suggests. To find a bullish shark pattern on a chart using technical analysis, follow the guidelines below.

• The initial wave, from 0 to X, is where patterns begin. X has to be greater than 0.
• The second wave from X to A requires a retracement to the 0.32-0.5 Fibonacci levels.
• B point must be located between the XA wave’s 1.13 and 1.618 Fibonacci extension levels.
• The C point must be located between the AB wave’s 1.618 and 2.24 Fibonacci extension levels. This is where the bullish shark pattern comes to an end.
• The 0 points should be located between the 0B wave’s 1.13-0.86 Fibonacci levels

To identify bullish shark patterns in trading, you must adhere to these guidelines.

Rules to Identify Bearish Shark Pattern

The bearish pattern shows that the market is moving in a bearish direction. It indicates that bears are approaching and will cause the market to decline.
To identify the bearish shark pattern in trading, much like the bullish patterns, you must follow these Fibonacci ratios.

• The initial point of the pattern is 0, hence X point must be lower than 0.
• To 0.32-0.5 Fibonacci retracement levels, the XA wave must retrace.
• Point B must be located between the XA wave’s 1.3 and 1.618 Fibonacci extension levels.
• C Point must be greater than 0 Initial Point and must be located within 0B wave’s 0.88 and 1.12 Fibonacci levels.

What does the Shark Pattern Signify?

In the market, stop-loss hunting is prevalent. If you observe this pattern with the eyes of a professional trader, you will notice that the market is breaking key levels to nab retail traders’ stop losses.

Let’s examine this chart pattern’s price activity.

The beginning point of the price is 0. Then the price retraces from point X to point A. Why does the pricing reverse from Point x? thus it served as a significant resistance level. As a result of increased demand, the market then reverses from point A, breaks resistance X, and establishes position B.

Keep in mind that when the market breaks over resistance, many shops will buy because of the breakout. By reaching breaking point X, the market began to pursue retailers’ stop-losses that had been placed above this resistance, trapping many buyers into opening buy positions as a result of the breakout.

Prices will now change, and many retail consumers may become discouraged. The demand level A will now be broken, and it will thereafter point to zero. Nearly all retail purchasers will close transactions in loss after the breach of point zero, and they will typically sell due to the support level breakout.
In the market, stop-loss hunting is prevalent. If you observe this pattern with the eyes of a professional trader, you will notice that the market is breaking key levels to nab retail traders’ stop losses.

What Does the Shark Pattern Tell Traders?

The shark trading method is a five-leg reversal pattern, like any other harmonic pattern. It adheres to specific Fibonacci ratios.

The configuration of the pattern’s five points, O, X, A, B, and C, sets it apart from other harmonic patterns. In addition, wave X is where leg B’s termination point terminates. It exceeds the Fibonacci ratio range of 1.13 minimum and 1.618 maximum.

These three Fibonacci principles should be followed by a genuine shark pattern:

• AB= retraces the XA leg’s Fibonacci extension between 1.13 and 1.618.
• Fibonacci extension of the 0X leg shows BC= extending to 113 percent.
• The target of the leg’s 50% Fibonacci retracement is represented by CD.

The 5-O pattern structure contains the shark harmonic pattern. Due to the structure, all trades must be based on point C, unlike the other harmonic patterns. While the predetermined profit target is used as point D. Typically, the 50 percent Fibonacci retracement of the BC leg marks the end of the CD swing leg. Additionally, it must meet the AB=CD requirement.

Trying to seize the last move of a complex pattern arriving at C, this is the most popular way the pattern is traded. Additionally, it targets the 50% retracement of the BC swing leg and contains a protective stop loss above or below the 2.24 of the AB retracement.

How to Trade When you See the Shark Pattern?

The best trading strategy for a shark pattern is very different from the best trading strategy for other chart patterns. 50 to 61.8 percent of BC is where the take profit can be found.

After the harmonic indicator has identified the pattern, the best time to enter this trade is at the opening of the following candlestick. Enter the market with a protective stop-loss at the 2.618 extensions of the AB swing-leg as soon as the C-leg forms.

Drawing the Pattern

• On the platform’s right-hand toolbar, select the harmonic pattern indicator by clicking on it.
• Choose any swing high or low point on the chart to serve as the starting point 0 for the chart.
• Track the market’s swing wave movements after identifying the first swing high/low point.

The harmonic crab pattern approach requires traders to have 4 points or 4 swing high/low points that connect together. Each swing leg needs to be verified and adhere to the shark pattern forex’s Fibonacci ratios.

Trading the Pattern

Purchase at point D, which must meet the condition that CD = 1.13 OX segment. The D to X ranges from 0.886 to 1.13, although it is recommended to make deals with the optimal 1.13 extension.

Stop-Loss

At point C, the stop-loss order can be set below the 1.150 Fibonacci extensions of XA. Move it after the D leg as the market starts to move in the direction of the initial take profit. As any break below will render the Fibonacci requirements for a shark pattern invalid, here is the optimal position to bury the stop-loss order.

You must exercise caution when trading this pattern, just as you do with any new pattern. You should only trade the best price structure that precisely fits into each Fibonacci ratio. Be picky! As a powerful counter-trend approach, the shark harmonic trading strategy performs exceptionally well.

Conclusion

The shark pattern is the most effective stop-loss hunting pattern in harmonic patterns. Although they are uncommon, harmonic patterns are the best and have a high winning accuracy. Because of Fibonacci ratios, it takes a little more work to spot these patterns on the chart.

You can identify the harmonic pattern in a one-second glimpse of the chart after backtesting this pattern at least 100 times. 15M to daily time frames are the best for trading harmonic shark patterns.