Butterfly Pattern

The "Butterfly" pattern was discovered by Bryce Gilmore and Larry Pesavento. It is one of the powerful patterns like the Gartley pattern. The "Butterfly" pattern has a distinct retracement level (0.786) of XA swing. In bullish and bearish 5-point swings, the pattern must have 0.786 to 0.886 of XA swing to be valid. In perfect "Butterfly" patterns, the AB swing will be equal to CD (AB=CD).

"Butterfly" patterns usually occurs at market tops and market bottoms. The pattern's success rate is much higher when the retracement and time ratios are harmonically aligned.

Two primary differences between the "Butterfly" and "Crab" patterns are: 1). The AB retracement must be 0.786 in the "Butterfly" pattern; where as in the "Crab" pattern, it lies between 0.382 and 0.618.2 levels 2). In both patterns the D point extends beyond the X and the C level can be inside or outside of the XA range. The retracement of AB defines level D. In Butterfly patterns, if B is formed at 0.786, the usual retracement of D could be near 1.27 of XA range.

Trade: Once the Butterfly pattern is completed in PRZ level, wait for a confirmation bar, wide range bar or "higher high" close bar to suggest a potential reversal from "D" level. Enter one tick above the high of the confirmation bar.

Stop: Place a "stop" order below (bullish) the low of the "Butterfly" pattern. For bearish Butterfly patterns, place a "stop" order above the high of the "Butterfly" pattern.

Target: Targets are set at 100% of AD and 162% of XA from D levels. In bullish butterfly patterns, beyond the A level, targets need to be protected with trailing stops._

Bullish Butterfly

AB = O.786 XA BC = O.382-O.886 AB XD = 1.27 XA
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