How to trade the Shark pattern? | R Blog RU


Shark pattern Is a structural model of price movement in the market, which consists of five impulses and foreshadows a trend reversal. The “Shark” pattern appeared in the assets of traders relatively recently, it was first identified and described in 2011 Scott M. Carney… The model itself refers to “Harmonious Trading”, which has developed Harold Gartley and described in his book “Profit in the Stock Market”.

“Shark” is similar to the “Double Top” and “Double Bottom” charting patterns, but in essence it is an updated 5-0 pattern. Reversal points in the Shark pattern are determined using the Fibonacci lines, which play a dominant role – without them it is impossible to determine whether the pattern has formed correctly.

In this article, we will consider the rules for the formation of the “Shark” on the chart, as well as the principles of opening positions based on this pattern.

How is the Shark pattern formed?

The “Shark” pattern consists of five points: 0, X, A, B and C, which are alternately formed on the chart. The visually formed model resembles a shark’s fin or its open mouth, but, in my opinion, all this is conditional.

Having seen all five points of the pattern on the chart, a trader may think that this is the “Shark”, but without the help of Fibonacci levels, this cannot be 100% asserted.

How to confirm the formed Shark pattern using Fibonacci levels?

All trading terminals have the Fibonacci Lines tool with basic settings, but they are not suitable for us. To test the “Shark” pattern, you need to delete the default levels (except “0”) and register others: 0.866, 1.13, 1.618, 2.24. Below are examples of changing settings in MetaTrader 4/5 platforms:

Fibonacci lines
Fibonacci lines

We have described in more detail how to set up Fibonacci levels in these terminals in our article “What are Fibonacci levels? How to use them in Forex?”

Bull Shark Formation

The bullish Shark pattern is formed as follows:

  1. As with all “Harmonious Trading” patterns, the price movement originates at point “0” and begins to rise, setting the price high, which is marked as “X”.
  2. Having tested the “X” point, the quotes form a slight correction. The point where the rollback is completed is indicated by the point “A”.
  3. After the test of point “A”, the quotes form another upward impulse with renewal of highs at point “B”.
  4. After the test of point “B” quotes start another correction, which ends at point “C”. This wave of decline will be the largest.

Testing the bullish Shark pattern by Fibonacci levels

We check the pattern by Fibonacci levels – for this we do the following:

  1. Stretch the Fibonacci grid from point “X” to point “A”. We need point “B” to be located within the boundaries of levels 1.13 – 1.618. If “B” is higher or lower, then there is no point in further considering the movement of quotations on the chart.
  2. Next, stretch the Fibonacci grid from point “0” to point “B”. Point “C” should fall within the range between the levels 0.899 – 1.13, if this does not happen, the pattern is considered broken.
  3. Recheck the location of point “C” by stretching the Fibo from point “A” to point “B”. In this case, “C” should be in the range 1.618 – 2.24.

Only if these three conditions are met, the “Shark” pattern can be considered formed.

Bullish Shark pattern

Formation of the “Bear Shark”

The bearish Shark pattern is formed in the same way, but in the opposite direction:

  1. The price movement originates at point “0” and begins to decline, setting a price low at point “X”.
  2. Having tested the point “X”, the quotes form a slight correction, and the place of completion of the rollback is designated as “A”.
  3. After the test of point “A”, the quotes form another downward impulse with renewal of minimums at point “B”.
  4. After the test of point “B” quotes start another correction, which ends at point “C”. This growth wave will be the biggest.

Testing the bearish “Shark” pattern by Fibonacci levels

In this case, the Fibonacci grid is stretched according to the same rules as with the bullish Shark:

  1. From point “X” to point “A”: point “B” must fall within the boundaries between levels 1.13 – 1.618.
  2. From point “0” to point “B”: point “C” should fall within the range between the levels 0.899 – 1.13.
  3. From point “A” to point “B”: point “C” should fall in the range 1.618 – 2.24.

Only if these three conditions are met, the “Shark” pattern can be considered formed.

Bearish Shark pattern

How to trade the Shark pattern?

Based on practice and despite the fact that there are clear rules for the formation of the “Shark” pattern, in some cases the position of the “B” point can be neglected – it may not lie within the boundaries of 1.13 – 1.618. With point “C” this will not work: it must be within the permissible limits in two dimensions.

Opening a buy position

To open a buy position, we need to find an emerging pattern on the chart, while it is better to choose a time interval greater than M15. Timeframes less than M15 give a lot of false signals.

In the chart below, we see how the quotes have formed two tops, the second of which is higher than the previous one – this indicates to us a possible beginning of the “Shark” pattern.

Further actions:

1. Mark the necessary points for ourselves on the chart: “0”, “X”, “A”, “B”.
2. Stretch the Fibonacci lines from point “X” to point “A” and check the position of point “B” – it should be within 1.13 – 1.618. This is exactly what happened in our example.
3. After a while, the price decreases and, having approached the support, begins to form a reversal – here point “C” appears.

Shark pattern – buy

4. Stretch the Fibonacci lines from point “0” to point “B”: point “C” during the first measurement should be within 0.86 – 1.13. In our example, point “C” is at the level of 0.86, which corresponds to the conditions for the formation of the “Shark” pattern.

Shark pattern – buy

5. The second time we measure the location of the point “C” using the Fibonacci lines. This time we stretch the Fibo from point “A” to point “B”: the price touched the level of 1.681, which confirms the correct location of “C”.
6. At the stage of formation of a rebound from the level of 1.618, open a buy position.
7. Stop Loss is set for the nearest minimum value – in this case, it will be the position of point “C”.
8. The initial guideline for Take Profit in this case is calculated based on 50% of the distance from “A” to “B”. The second target for Take Profit is at point “B”.

Shark pattern – buy

Opening a sell position

On the chart below, we see that the quotes have formed two minimum values, similar to the “Double Bottom” technical analysis pattern, only the second minimum is much lower than the previous one. This could be the beginning of the Shark pattern formation.

We act:

1. Mark for ourselves the points “0”, “X”, “A”, “B” on the chart.
2. Stretch the Fibonacci lines from point “X” to point “A”. Point “B” should be between 1.13 and 1.618, which is what happens in our example.

Shark pattern – sale

3. After a while, the price goes up and, having approached the resistance, begins to form a reversal – at the point of the reversal we mark the point “C”.
4. Stretch the Fibonacci lines from point “0” to point “B” – point “C” during the first measurement should be within 0.86 – 1.13. In our example, point “C” is in the required range, which corresponds to the conditions for the formation of the “Shark” pattern.
5. The second time we measure the location of the point “C” using the Fibonacci lines. This time we stretch Fibo from point “A” to point “B” – the price touches the level of 1.681, which confirms the correct location of “C”.

Shark pattern – sale

6. At the stage of formation of a rebound from the level of 1.618, open a sell position.

7. Stop Loss is set for the nearest maximum value – at the level of point “C”.
8. The initial guideline for Take Profit in this case is calculated based on 50% of the distance from “A” to “B”. The second target for Take Profit is at point “B”.

Shark pattern – sale

Conclusion

The “Shark” pattern has appeared in the arsenal of traders relatively recently, but nevertheless many have already fallen in love with it. Determining it on the chart is not an easy task at first glance, but it is worth practicing and gaining experience, as the speed of pattern detection will increase, and you can successfully use the Shark to analyze the market situation. At the same time, do not forget about money management and deliberately open positions.


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