The price of all assets traded within the financial market moves in cycles. These courses tend to replicate themselves and then form geometric patterns. Studies have shown that the ribs that make up these unique geometric patterns are linked to each other through Fibonacci ratios. Each of these patterns is referred to as a different name, usually an animal name, as shown in the graph. As these patterns evolve naturally, they are referred to as consensual patterns.
Through harmonic models, the Tera APP trader can determine the price level at which the price can be subject to a reversal. Thus, it gives an early entry feature to the trader as long as the validity of expectations is shown. However, like any other trading system, the harmonic pattern has some flaws. This article discusses the main disadvantages of harmonic trading or harmonic model.
1. It has too many patterns
The ribs forming the harmonic pattern are always linked to Fibonacci ratios, which is the focus of price movements. Hence, harmonic patterns are based mainly on Fibonacci ratios. If there is one pattern, the trader may be able to remember those ratios. On the contrary, there are at least half a dozen of harmonic models (bat, butterfly, crab, AB = CD, Gartley, etc.) and thus, it becomes difficult for the trader to study, remember, and identify those patterns without using specialized software or indicators. In addition, the trader finds it difficult not only to identify the harmonic model that is likely to achieve successes but also the model that would provide significant gains.
2. Contradictory signals
This is the most common problem faced by novices. Harmonic models, evolving in different time frames, may show conflicting signals. So much so that we may see two bullish and bearish models at the same time. Which may create a kind of confusion in the minds of traders. The USD / JPY chart below shows a bearish harmonic pattern in the 15-minute timeframe and another Harmonic pattern of the ascending bull in the 30-minute timeframe. In such circumstances, only prior trading experience will enable the trader to assess the situation and make a sound decision on the trading. Just knowing the harmonic pattern will not be enough:
3. High probability of losing contact
Traders who strictly follow the harmonic trading rules confirm the accuracy of entry levels and stop loss levels. However, it can be understood that entry rules and stop loss are susceptible to manipulation by key players and can become a major flaw. In the Forex market, a few points in the potential reversal zone (PRZ) may be more than enough to trigger stop loss orders easily during periods of price volatility.
4. Forecasting accessories
Although harmonic models are generally seen as a specific set of trading rules, this is not always the case. In many compatibility models, the ribs that form the compatibility pattern can have extensions. For example, in AB = CD, the length of the CD leg can be either 1.27 or 1.618 from the length of the AB leg. In such circumstances, the professionals calculate the possible length of the CD leg by studying the BC leg. Needless to say, experience is the only source through which these techniques can be learned and thus we get rid of the concept of smart decision making by learning compatibility models.
5. Time frame
Harmonic models only deal with the ratio between price fluctuations. TeraAPP does not mention anything about the time frame you choose or the time needed to achieve or violate a particular pattern. Furthermore, compatibility models are mostly used by swing traders who hold an open position for several days. Harmonic trading is not commensurate with short-term time frames and trading day in general.
6. Pure technical model
Consensual models are based on the assumption that humans tend to repeat past behavior even unconsciously. If the fundamentals of financial assets have changed radically, the pattern will surely fail. A professional trader must attach importance to the fundamentals that strengthen or weaken the currency. When a large number of traders place orders to buy or sell just because the pattern refers to a bounce at a certain point, if the whole thing becomes a self-fulfilling prophecy. The Smart Capital Manager can easily transfer stop-loss orders very quickly at any given time. While there is no denying that short-term fluctuations can not always be explained by economic data, still, placing a buy or sell order that entirely depends on the harmonic pattern is certainly not a wise decision.
7. Style can be changed to other style
There is no guarantee that the harmonic pattern will complete as expected. The ribs can stretch leading to model failure. Moreover, the pattern can also turn into another style. Let’s assume that the Gartley model evolves in the price chart. AB should be equal to the CD leg. However, CD regression may not be equal to AB. To represent the last high swing with X, then in the harmonic Gartley model, point B and D should not exceed point X, while point C should not exceed A. If D exceeds point X, the pattern becomes a failure. In addition, the pattern can be transformed into harmonic Butterfly pattern. This prospect would put the novice trader into a dilemma.
8. Issues related to the potential bounce area (PRZ)
In some harmonic models, there is a potential reversal region where the price is composed of many ratios of Fibonacci. The issue is that the levels shown by Fibonacci ratios may be more than 50 points. For example, the ratios that make up the potential reversal levels in the Gartley model are 0.786 XA, 1.27 BC, and 1.618 BC. Moreover, the level at which AB = CD can eventually achieve a potential reversal area. Therefore, it is not possible to place an order immediately and wait for the price to reach the potential reversal area. So the retailer should constantly monitor the formation of bottoms or higher price peaks to enter into a buying or selling position. This makes the model-based harmonic structure a complex process.
9. Graphs Idiots
When you look at the price chart you find it particularly inaccurate when you attach the harmonic pattern on the chart. Early-dated traders are often advised to keep the price chart clean so that support and resistance levels can be clearly seen. Having multiple lines on the price chart would distract the trader from significant levels.
10. Abundance of new patterns
There is no paucity in claims for new compatibility models on the Internet. There are slight differences in style between the six harmonic patterns. In fact, such claims add another dimension to the complexity of the circulation of harmonic models. .
There is no doubt that harmonized models provide a degree of excellence to the Tera APP Scam trader. However, experience, practical experience and compliance with rules, such as turtle traders, are the most important to success in trading.