Emerging Butterfly Pattern on EURUSD Daily Timeframe

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– The pattern is considered complete upon reaching point D.
– Usually the pattern is traded (in this case to the upside) once/if price reaches point D, with a stop below that point.  Targets would be Fib 127.2/161.8 of the AD leg.  It’s best to look for signs of a reversal (e.g. divergence, reversal candles etc.) as opposed to simply expecting price to switch direction.
– Although the overall pattern would be classified as a Bullish Butterfly, I tend to trade the CD leg as well.  This is what’s reflected in the chart.
– My preference is to choose intermediate targets whichever leg you’re trading.  e.g. if the CD leg is traded, then I would take some profits before point D (127.2 of XA).  Butterflies can potentially go up to 161.8 of XA. 
– I enter with 3 lots.  if the trade works in my favor, then I would take intermediate profits for the 1st two, with the final target set for the 3rd lot.  Upon hitting target 1, the SL for the other two would be moved to BE.  Upon hitting target 2, the SL for the last lot would be moved to a technical level (S/R, Fib etc.).
This entry was posted in Butterfly, Divergence, EURUSD, Forex, Harmonic Pattern, Misc. Setups. Bookmark the permalink.

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