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Butterfly Pattern |
sureenderkalra
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Joined: 11 Dec 2012
Posts: 174
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Post: #1  Posted: Sat Aug 17, 2013 1:43 pm Post subject: Butterfly Pattern |
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Hi,
I am going to start this thread and hope that everybody will get benefitted out of it. Your views are very valuable to improve the quality of this thread and at the same time, to get some bucks together.
Butterfly pattern is very profitable pattern. It provides potential of higher rewards with lower risk.
I am attaching a pdf format file with it so that you may come to know what is butterfly pattern, why is it so important to know for a trader.
Nifty is forming Point D of the same pattern. I will post the chart by tomorrow (Sunday) so that you may make an entry on Monday. |
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amitagg
Black Belt
Joined: 01 Oct 2013
Posts: 4559
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| Post: #2 Posted: Sat Aug 17, 2013 2:46 pm Post subject: |
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Great. Lets do some more work on it. 2 points for resarch -
i) at first glance, pattern appears difficult to configure / differential from Double Bottom / Top formation [in practice may be risky to trade at point D when pattern is formed of lower highs [C lower than A] and lower lows [D lower than B]
ii) while this is practical application in than a break of support would or can result in pullback, etter trading strategy often is to TRADE IN DIRECTION OF TREND and let the pullback end so that the primary trend can be traded
so my first comments are:
- whether more suited for intra-day trading
- [in case of bull butterfly chart] better to taken 'short' position at point C [ similar to ABC elliott wave when C fails to break A during uptrend and then declines]
- needs back testing
sure a good insight to come and lets see |
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apka
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Joined: 13 Dec 2011
Posts: 6137
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| Post: #3 Posted: Sat Aug 17, 2013 2:48 pm Post subject: |
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so what level of nifty forms the D?
as per the diagram, it needs to go further below 5477 to make the pattern. hopefully coming near 5380-5400? |
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amitagg
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Joined: 01 Oct 2013
Posts: 4559
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| Post: #4 Posted: Sat Aug 17, 2013 3:04 pm Post subject: |
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as per counts given it comes to [approx]
i) 6153-5480 = 673 so 6153-673*1.27 = 5300 - XA*1.27
OR
ii) 6093-5548 = 545 so 6093-545*1.618 = 5200 - BC *1.618
like good these counts coming from from butterfly calculations given = seems plausible and one pullback expected at both levels
can be traded to ligthen/ end [once] shorts at these respective levels and add some fresh longs [depends] |
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manu_5123454
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Joined: 22 Oct 2009
Posts: 91
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| Post: #5 Posted: Sat Aug 17, 2013 3:05 pm Post subject: |
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If this pattern (Bullish Butterfly pattern) will make on bearish trend or in falling price then we could jump on D levels to add buying position. But this current trend (Nifty) indicates from bull to bear means Uptrend to downtrend that means we should n't add this method at this time whereas Nifty is trading below weekly Ending diagonal Pattern which indicates very very bearish coming at least near 4800 levels.
u can see same pattern as Yes bank,tata motors,etc. |
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pkholla
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Joined: 04 Nov 2010
Posts: 2890
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| Post: #6 Posted: Sat Aug 17, 2013 8:31 pm Post subject: |
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S Kalra: In what way this butterfly pattern is different from WOLFE WAVE already being discussed in two threads in this forum?
Prakash Holla |
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hasten
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Joined: 30 Jun 2011
Posts: 216
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| Post: #7 Posted: Sat Aug 17, 2013 11:49 pm Post subject: |
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| pkholla wrote: | S Kalra: In what way this butterfly pattern is different from WOLFE WAVE already being discussed in two threads in this forum?
Prakash Holla |
Butterfly pattern was discovered by Bryce Gilmore and Harold McKinley Gartley.These patterns normally form when a correction of the overall trend is taking place and look like 'M' (or 'W' for bearish patterns).
What makes these Harmonic Price Pattern {CRAB ,BAT ,BUTTERFLY} different From other price patterns like wolf wave ,channel etc etc is Fibonacci Retracement and Fibonacci Extension level.For all these harmonic patterns, the point is to wait for the entire pattern to complete before taking any short or long trades.
Wolfe Wave is a Channeling Patterns .Wolfe Wave pattern consists of five waves with the fifth wave extending beyond the equilibrium line.{totally different from BUTTERFLY }
The perfect Butterfly pattern is defined by the .786 retracement of move AB with respect to move XA. The Butterfly contains these specific characteristics:
Move AB should be the .786 retracement of move XA.
Move BC can be either .382 or .886 retracement of move AB.
If the retracement of move BC is .382 of move AB, then CD should be 1.618 extension of move BC. Consquently, if move BC is .886 of move AB, then CD should extend 2.618 of move BC.
CD should be 1.27 or 1.618 extension of move XA.
NOTE:-For equation refer chart posted below by sureenderkalra.
Regards,hasten
Trade what you see Not What you believe.
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pkholla
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Joined: 04 Nov 2010
Posts: 2890
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| Post: #8 Posted: Sun Aug 18, 2013 10:35 am Post subject: |
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| Hasten: Thanks a lot for the clear explanation and for adding to our trading knowledge. Jai Hind, Prakash Holla |
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sureenderkalra
White Belt
Joined: 11 Dec 2012
Posts: 174
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| Post: #9 Posted: Sun Aug 18, 2013 12:55 pm Post subject: Reply [quote="amitagg"] |
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| amitagg wrote: |
Great. Lets do some more work on it. 2 points for resarch -
i) at first glance, pattern appears difficult to configure / differential from Double Bottom / Top formation [in practice may be risky to trade at point D when pattern is formed of lower highs [C lower than A] and lower lows [D lower than B]
Uquote
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I completely agree with you on this point. But, at the same time, we should remember that this pattern is based on Fibs. Levels & extension. As we all know that 78.6% and 88.6% the levels of fibs are considered as reversal points. And 127% and 161.8 (Golden ratio of fibs) are condered as achievable as well as reversible point.
I dont mean here that we should blindly trade at this points. we may trade here after getting some kind of confirmation.
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ii) while this is practical application in than a break of support would or can result in pullback, etter trading strategy often is to TRADE IN DIRECTION OF TREND and let the pullback end so that the primary trend can be traded
Unquote
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I agree with you word to word.
Quote
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so my first comments are:
- whether more suited for intra-day trading
- [in case of bull butterfly chart] better to taken 'short' position at point C [ similar to ABC elliott wave when C fails to break A during uptrend and then declines]
- needs back testing
sure a good insight to come and lets see |
Unquote
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- This pattern is meant for positional trader not for Intraday trader.
- I technically agree with you.
- Unfortunately Continuous process |
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sureenderkalra
White Belt
Joined: 11 Dec 2012
Posts: 174
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| Post: #10 Posted: Sun Aug 18, 2013 1:16 pm Post subject: [quote="apka"] |
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| apka wrote: | so what level of nifty forms the D?
as per the diagram, it needs to go further below 5477 to make the pattern. hopefully coming near 5380-5400? |
Unquote
________
At this point of time, we should calculate 127% of XA, i.e, 5304 and 161.8% of BC i.e. 5217.
i am attaching a chart too herewith.
Happy trading. |
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sureenderkalra
White Belt
Joined: 11 Dec 2012
Posts: 174
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| Post: #11 Posted: Sun Aug 18, 2013 1:27 pm Post subject: |
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| amitagg wrote: | as per counts given it comes to [approx]
i) 6153-5480 = 673 so 6153-673*1.27 = 5300 - XA*1.27
OR
ii) 6093-5548 = 545 so 6093-545*1.618 = 5200 - BC *1.618
like good these counts coming from from butterfly calculations given = seems plausible and one pullback expected at both levels
can be traded to ligthen/ end [once] shorts at these respective levels and add some fresh longs [depends] |
Unquote
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I trust that i have covered your this point too in my previous reply.
By the way, we will definitely not jump into a trade keeping our eyes closed. Rest assured, we all will trade here after getting a proper signal to buy. Otherwise we will let it go. Since opportunity comes and opportunity goes but we are here for ever.
Please keep posting. |
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sureenderkalra
White Belt
Joined: 11 Dec 2012
Posts: 174
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| Post: #12 Posted: Sun Aug 18, 2013 2:35 pm Post subject: Reply [quote="manu_5123454"] |
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| manu_5123454 wrote: |
If this pattern (Bullish Butterfly pattern) will make on bearish trend or in falling price then we could jump on D levels to add buying position. But this current trend (Nifty) indicates from bull to bear means Uptrend to downtrend that means we should n't add this method at this time whereas Nifty is trading below weekly Ending diagonal Pattern which indicates very very bearish coming at least near 4800 levels.
Unquote
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No, Not at all. We should avoid to jump on to make entry in any trade until and unless we get reversal signal. To get to overcome all of this, I generally use trendline alongwith sliding line and 34,5 / 34/10 moving average envelope.
You are abolutely right as far as your opinion on nifty is concerned. i am too bearish at this point of time but I am looking 5217, 5050 (major resistance)
Quote
u can see same pattern as Yes bank,tata motors,etc. |
Unquote
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Thanks for sharing same pattern with me.
I saw both the charts today and found that yes bank was associated with butterfly pattern as well as wolfe wave pattern. Having failed wolfe wave pattern once, both wolfe and butterfly rushed yesbank down breaking all the fibs ratios levels of D point.
Kindly note, yes bank has yet not given any reversal signal as per the rule. Attaching a chart for your reference.
Tatamotors is in forming D Point |
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sureenderkalra
White Belt
Joined: 11 Dec 2012
Posts: 174
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| Post: #13 Posted: Sun Aug 18, 2013 2:36 pm Post subject: |
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| manu_5123454, I missed the attachment. chart is here |
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sureenderkalra
White Belt
Joined: 11 Dec 2012
Posts: 174
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| Post: #14 Posted: Sun Aug 18, 2013 2:47 pm Post subject: |
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| pkholla wrote: | S Kalra: In what way this butterfly pattern is different from WOLFE WAVE already being discussed in two threads in this forum?
Prakash Holla |
Unquote
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I trust that hasten has elaborately explained your query.
Butterfly pattern being a based on fibs levels, one get a more chance to make entry in the trade in comparison to wolfe wave.
Happy trading |
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sureenderkalra
White Belt
Joined: 11 Dec 2012
Posts: 174
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| Post: #15 Posted: Sun Aug 18, 2013 2:51 pm Post subject: |
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| hasten wrote: |
Regards,hasten
Trade what you see Not What you believe.
[/b] |
Thanks hasten for helping me out. Please keep showering your treasure of knowledge on us so that we all get benefitted out of it.
Thanks once again. |
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