The ABCD pattern is a useful technical analysis algorithm that allows traders to predict when price action will change direction in a market. It gives buy and sell determinations to investors according to the formation of an uptrend or a downtrend.
In a market, waves are observed on a chart shaped by the buying and selling actions of investors. The ABCD pattern is a pattern that occurs in these waves. This formation is determined by 4 points as A, B, C, D and 3 waves as AB, BC, CD. Wave 1 is a impulse wave from A to B, Wave 2 is a corrective wave from B to C, Wave 3 is a impulse wave from C to D.
The wavelengths of the waves formed in the ABCD formation can be different from each other. However, Coinlegs software developed the ABCD signal using the AB =CD pattern. The AB = CD formation occurs when the AB impulse wave is equal to the CD impulse formed after the correction wave.