How to profit with the Harmonic Shark

Pattern?

Harmonic Pattern Trading have gotten more and more popular across institutional and retail
traders over the past few years due to increased exposure in the media as well as the overall
effectiveness of this trading system.

In fact, this is also one of the few trading methodologies which has been constantly updated
over the years. Scott Carney just launched the 3rd book titled Harmonic Trading Volume 3:
Reaction VS Reversal back in October 2016 which added on a lot of depth to what he shared
in his previous books. (Scott penned his first book The Harmonic Trader back in 1999)

In this article, Im will reveal how to draw and profit from this relatively lesser known
Harmonic pattern known as the Shark pattern which compromises about 60% of my personal
trade setups right now.

Do not confuse this with the Cypher pattern, which looks similar to the Shark pattern but was
not created by Scott Carney. In fact, most Cypher patterns will evolve into Shark patterns
eventually and learning how to trade the Shark pattern will actually help you to increase your
winning percentage and your average risk to reward ratio in your trades.

I will also touch on execution strategies based on theories I share with my followers every
week in my videos and webinars at HarmonicForex.com.
What is a Shark Pattern?
The Shark pattern is relatively new Harmonic Pattern created by Scott Carney in 2011, where
he used a mixture of Elliot Waves theories and Fibonacci numbers to create this brand new
pattern with relatively high success rate.

Based on my personal back testing on my tradingview account, I get almost a 50% success
rate when trading this pattern. 50% is amazing if you factor in the high risk to reward ratio I
get on my trades. This means, if my particular setup risks 50 pips, the reward is usually 75
pips to 200 pips. (1:1.5 to 1:4)

Take this example on AUDUSD posted in March 2017 as an example.In this example, I risk
40 pips to make 220 pips. This trade was floating for a total of 19 days before it reached my
2nd profit target.

EP: 0.7740
SL: 0.7780 (40)
TP1: 0.7620 (120 pips)
TP2: 0.7520 (220 pips)

(Before) AUDUSD Shark Pattern Completes (21st March 2017)

 (After) AUDUSD Shark Pattern moves to profit target (8th April 2017) +220 pips!

Interesting? Let me go through with you the basics on how to draw this pattern. This is how it
looks like.

Pattern Basics

1. A qualified Shark pattern consists of an impulse leg (XA), followed by a retracement

leg (B) that has no specific value.
2. That is followed by a continuation leg (C) that must at least reach the 113% Fibonacci
extension of the BA leg without exceeding the 161.8%.
3. Next, a Fibonacci retracement of X to C is drawn. The qualified Shark pattern must
reach 88.6% of the XC Fibonacci retracement and it cannot exceed the XC 113%
extension.
 4. Next, draw the BC Fibonacci extension. The key to this pattern is the 161.8 extension
of the BC Fibonacci extension. It must reach a minimum of 161.8 and it cannot
exceed 224%
5. The area where the BC Fibonacci extension and the XC Fibonacci retracement
overlaps is known as the PRZ. This is the zone where we look to enter our trades.

This Green zone (PRZ) is where the BC extension

161.8 and the XC retracement 88.6 overlaps.

This point C should fall within BA extension 113%

to 161.8%

Q&A
A common question I get from my followers is, if the candle wick exceeds any of the above
stated requirement, is the pattern still valid?

The answer is yes, in fact, even if the candle closes just slightly above/below the boundaries,
the pattern is still valid. Scott advocates a 3% rule where the candle close should not exceed
the boundaries by more than 3%.

However, I realized that using % is not that easy to calculate for traders in real time.
Therefore, my advice is to use 10 pips as a gauge when it comes to boundary violation.

Executing the trade when the price reaches the

PRZ
Now that you understand how to draw and qualify the pattern, I will share how to execute this
pattern across 3 scenarios.
Earlier, I mentioned drawing a Fibonacci retracement of X to C and the Fibonacci extension
of B to C to qualify the D point of the Shark pattern.

Scenario 1

When the BC extension reaches the 161.8% level before the XC 88.6%, we look to execute
the trade off the XC 88.6% level (Black Line).

BC 161.8%
XC 88.6%

Look to enter your trade after the XC 88.6% is reached.

Scenario 2

When the BC extension reaches the 161.8% level after the XC 88.6%, we look to execute the
trade off the XC 100% level (Green Line).

XC 88.6%
BC 161.8%
XC 100%

Scenario 3

When the BC extension reaches the 161.8% level after the XC 100%, we look to execute the
trade off the XC 113% level (Blue Line).

XC 100%
BC 161.8%
XC 113%

Entry
Take note that in all 3 scenarios, we should look for price action after these levels are tested
before we execute our entry. Do not use a pending order to enter these Harmonic Pattern
setups as that will decrease the success rate easily by 20%. Monitor for these setups instead
for higher success rate.

1. Wait for a candlestick reversal that closes above/below the PRZ zone before entry
2. Wait for a pin bar/hammer candlestick to form after the PRZ is completed before
entry. (I love long wick candles before I enter, it really increases the success rate of
Harmonic Pattern trades)
3. I usually combine the RSI indicator with patterns. Always wait for the RSI to leave
the overbought/oversold zone before entry
Take Profit

The profit target for the Shark Pattern is as follows.

TP1: Fibonacci retracement 50% from C to D leg

TP2: Fibonacci retracement 88.6% from C to D leg

Stop Loss

The stop loss level for the Shark Pattern is as follows.

I use a different buffer for different timeframe setups. I only trade these 3 timeframes.

H1 Buffer (10 pips)

H4 Buffer (30 pips)
Daily Buffer (50 pips)

This serves as a guide only and it might not work for every currency pair as the volatility is
different. 70% of the currency pairs that I trade can work well with this buffer.

Scenario 1: SL is set XC 100% +buffer or -buffer

Scenario 2: SL is set XC 113% +buffer or -buffer

Scenario 3: SL is set XC 127.2% +buffer or -buffer

More Shark Pattern Examples

In 2017 alone, I have traded more than 10 Shark pattern setups. I will share with you 3 more
good examples which I document on my tradingview account for you to understand this
pattern better.

1. US Dollar Index (31/3/2017) http://bit.ly/2odI4VT

2. USDJPY (12/3/2017) http://bit.ly/2oc0V1U
3. GBPAUD (10/3/2017) http://bit.ly/2nPy1mu

Final Thoughts
I hope that after reading this guide, you will have better understanding of the Harmonic Shark
pattern. I highly suggest not to trade this pattern on timeframes lower than the hourly (H1)
timeframe as that will significantly decrease the success rate of the pattern.

No matter what powerful strategies you learn, always remember to do your own due
diligence. That means take whatever statistics I tell you with a pinch of salt. To gain
confidence in a trading strategy and find out the overall effectiveness based on your trading
and mental habits, you should do these

1. Back test and forward test at least over a period of 6 months or over 300 different
trade setups (Demo account before live account is recommended)
2. Record your trading results and document your thoughts over this period
3. Risk not more than 2% on every trade setup

The same strategy might not always deliver the same results to 2 separate individuals, our
psychology and reaction to drawdowns and profits are not the same.

Never stop learning and keep asking questions, I will be more than willing to answer any of
your trading related questions.
 About the Author

Terry Tan is the founder of HarmonicForex.com, the only trading academy in Asia accredited
by Scott Carney to teach Harmonic Trading. Terry started trading 9 years ago while he was
doing his national service. He has 6 years of experience trading Harmonic Patterns and has
been personally mentored by Scott Carney back in 2016. Terry hopes to impart good and
realistic trading education through his academy. Till date, he has mentored over 500 students
with his team over the past 4 years throughout Asia. He can be reached at
terry@harmonicforex.com

Download a copy of The Harmonic Trader Ebook and attend FREE webinars every
Wednesday by Terry. Click to download