AB=CD Pattern
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.
In an uptrend market, the price action rises up to a certain level and an AB impulse wave is formed. Then, by making a corrective movement, it drops a little and a BC correction wave is formed. After the correction, an uptrend is observed with an impulse wave and a CD impulse wave is formed. In the ABCD formation formed in this way, the price movements are expected to decrease by correcting again. When the pattern is completed, that is, when the price action reaches the D point, traders consider this situation as a sell signal.
In a downtrend market, the price action drops to a certain level and an AB impulse wave is formed. Then, by making a corrective movement, it rises a little and a BC correction wave is formed. After the correction, a decrease is observed with an impulse wave and a CD impulse wave is formed. In the ABCD formation formed in this way, the price movements are expected to increase by correcting again. When the pattern is completed, that is, when the price action reaches the D point, traders consider this situation as a buy signal.
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