Crab pattern was developed by Scot Carney and was named so because the bullish version of it looks like walking crab. This pattern is quite rare, but its creator, being a great harmonic patterns enthusiast, believed it was the most accurate of all. Apart from that this pattern probably has the best risk/reward ratio among all of the Harmonic Patterns. There are 2 versions of the pattern bullish (looks like a bit skewed letter ‘M’) and bearish (looks like a bit skewed letter ‘W’). Below are the schematic pictures of the Bullish and Bearish Crab patterns:
- AB movement should be 0.382 or 0.618 retracement of XA.
- BC movement should be 0.382 or 0.886 retracement of an AB.
- If the retracement BC 0.382, then the CD must move 2.24 of BC. Consequently, if BC is 0.886, then the CD should be 3,618 BC.
- Movement CD should be 1.618 retracement of XA
Crab Pattern is a trend reversal pattern, it is traded against the overall trend when the price is approaching point D. The stop is placed few ticks below/above the farthest possible D level. The safe target lies within 38.2-61.8% of AD move. Many patterns can do much better than that, but the conservative targets must be used to lock in profit and possibly unloading part of the position. Entries might be done with a limit order or on price reversal away from D. All entries must be tested for risk/reward ratio. Entries with low risk/reward has to be taken cautiously or discarded altogether.
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