I have been trading cryptocurrencies for 11 years, and it was only 7 years ago that I figured out a trading system that suited me, and it was only through the guidance of experts that I gained insight! Currently, I can't say I'm extremely wealthy, but I have achieved stable profits, at least I can steadily outperform the index.
A long time ago, I understood that a good trading system can effectively help investors in their investments. I also realized that without a trading system, investing aimlessly is destined to result in more losses than gains. However, summarizing a trading system is truly quite difficult.
An excellent trading system is also counterintuitive; it requires you to overcome greed and fear, to be decisive, not to make subjective judgments, and to execute strictly.
As an investor with emotions in an emotional market, it is very difficult to strictly adhere to your trading system. What’s even harder is that a good trading system is not just theoretical knowledge; it is refined through countless trials and errors. It took me seven years just to polish this trading system.
Now, this trading system may only be somewhat more mature than a half-finished product, and I cannot say that this system is definitely excellent; there are still many areas that need to be refined and improved through more trial and error. The road is long and winding; the market is changing, and the trading system must follow the market for dynamic adjustments.
In addition to solid skills, I also strictly adhere to the following 10 iron rules of trading:
1. Do not chase high prices to buy cryptocurrencies. Always have the mindset that whatever price it reaches is fine; consider that the cryptocurrency does not exist.
2. There are only two types of cryptocurrencies; those bought at good entry points are good coins; otherwise, they are trash.
Cryptocurrency; high-level entry points are the best quality coins. Patiently wait for the high-level accumulation coins to become truly quality coins; this is the true mindset.#币圈起伏落袋为安
3. In fact, the most important thing in trading cryptocurrencies is the mindset. Many people clearly know it’s not a buying point, but can’t help but act on impulse; this is a psychological issue. If this is not resolved, any theory is useless.
4. Maintain a stable mindset; do not have emotions towards any cryptocurrency or price level, only observe the signals from the market. You should have feelings towards buying and selling points. If you have good technology and sufficient capital, for example, you can operate weekly or monthly, you can build positions in batches and diversify your positions. Then, there will be no late issues at any time.
5. The reasons for mistakes are never related to the market; to find reasons, one can only look for their own reasons. Every mistake must be summarized immediately.
6. The mentality of being eager to make money is a big taboo for us cryptocurrency traders. If you can't control your own heart and cannot control your greed and desires, you cannot succeed in the market for a long time. In two forms, when you are holding cryptocurrencies, your thinking is controlled by bulls; conversely, you are a slave to bears.
The market's emotions accumulate and are guided from here. Those who cannot escape this state will forever remain false market participants.
7. Trading cryptocurrencies tests long-term profit capability, not the ability to explode once; the key is a long-term effective trading strategy. When buying, consider all kinds of situations; holding must be decisive, and selling must be even more decisive; this is the only way to gradually improve.
Are you trading? The cryptocurrency should not be trading you; start with yourself.
8. The virtual currency market will only reward those who are patient; any good cryptocurrency needs to be nurtured. Those who change coins every day will definitely remain small-cap and small-scale. Focus on one; running around every day will not yield big profits.
9. Dance to the rhythm of the market; as long as you follow the market's rhythm, you can glide lightly on the edge of a blade. Rhythm is always the market's rhythm; a market participant without a sense of rhythm will always face torment. Put aside your greed and fear, and listen to the market's rhythm. As long as you can operate according to the rhythm, no one can block you. The market has a rhythm; grasping the current rhythm, no one can defeat you.
10. For capital players, remember that the power of patience is the greatest. As long as you have a good mindset and techniques, waiting patiently, holding patiently, and observing patiently is essential; this can overcome everything.
In my years of day trading, the ABCD pattern can be said to be the most frequently appearing and easiest to make money from technical pattern. It’s not complicated, doesn’t have a bunch of flashy indicators, but it’s just effective, with clear structure and intuitive logic, providing signals very decisively.
When I first entered the market, many opportunities were actually right in front of me, but I just didn’t dare to take action. Later, after thoroughly understanding the ABCD chart patterns, the market suddenly became 'ordered': where the push is, where the pullback is, where to wait, and where to enter, all became clear. Entering the market was no longer based on feelings, but based on structure, logic, and expectations, and profits naturally became stable.
It’s no exaggeration to say that whether you are just starting to learn trading or have been doing it for years, as long as you are doing day trading, the ABCD pattern is almost an essential foundational skill. It can help you improve your win rate, and more importantly, it lets you know 'why you should trade here.'
Next, I will take you apart this pattern completely - to see why it is so useful in day trading and how you can truly turn it into a profit tool in your account.
Successfully applying the ABCD pattern involves understanding the market psychology behind it
The ABCD pattern is not just a few lines on the chart; it essentially reflects the behavior of people in the market. By connecting the four key price points A, B, C, and D, this pattern clearly presents the fluctuations of market sentiment, showing how fear and greed drive price movements. To truly utilize the ABCD pattern effectively, understanding the trading psychology behind it is key.
Taking the bullish ABCD pattern as an example. The first segment AB is usually a wave of decline driven by panic emotions and selling; the subsequent segment BC is a price correction rebound, where some buyers see an opportunity; however, this rebound often lacks confidence, quickly triggering the next decline CD; and the last drop in segment CD usually accompanies concentrated stop-losses or capitulation selling from short sellers, which is exactly the position where market sentiment is extremely exhausted, also providing potential buying opportunities for traders anticipating a reversal.
Fear, greed, and the formation of the ABCD pattern
The true power of the ABCD pattern lies in its ability to capture changes in market psychology. Fear and greed do not appear randomly; they repeatedly present in specific structures. The ABCD pattern is precisely a framework for understanding and predicting these emotional fluctuations, helping traders find opportunities during extreme emotions.
✔ Point A (initial extreme value): In a downward trend, it represents the peak of panic; in an upward trend, it represents the peak of greed.
✔ Point B (first retracement): Market sentiment begins to loosen, and some traders start to doubt the original trend.
✔ Point C (second retracement): Original emotions briefly return, often 'trapping' traders who entered too early at point B.
✔ Point D (second extreme value): Emotions are thoroughly exhausted, forming a high-probability reversal area.
The structure of the ABCD pattern and the Fibonacci relationship
The reason the ABCD pattern is so popular is that it helps judge trend reversals and provides relatively precise entry points. The key to recognizing this pattern lies in the combination of price, time, and Fibonacci ratios.
In the bullish ABCD pattern:
✔ Segments AB and CD are often equal in length or time;
✔ Segment BC typically retraces 61.8%–78.6% of segment AB;
✔ The extension of segment CD relative to BC; common targets are 127.2% or 161.8%, thus forming a relatively precise entry area.
The ABCD pattern is widely present in various varieties and cycles, making it a highly versatile analysis tool in forex, stocks, and other markets. Many traders use tools like TradingSim and historical data to continuously refine their ABCD trading strategies, which fully demonstrates the practical value of this pattern in modern trading systems.
Truly understanding the market psychology behind the ABCD pattern will provide traders with a distinct advantage. Just knowing what the pattern looks like may allow you to make money occasionally, but to apply it in a 'stable and effective' way, you must know why it works. Understanding this, you will be more confident when placing orders and can flexibly adjust strategies according to different market environments. Combining the ABCD pattern with other technical analysis tools and overall market context often significantly increases the success rate.
Discover high-winning-rate ABCD patterns that others find difficult to detect
Being able to identify a 'textbook-style' ABCD pattern is one thing; being able to find patterns with real profit potential is entirely another. Experienced traders know very well that not all ABCD patterns are worth acting upon. They have the ability to distinguish between high-probability opportunities and false signals, the latter of which often trap beginners.
This judgment comes from sensitivity to the details of the pattern and an overall understanding of the current market environment. The pattern itself is just a skeleton; the market background is the soul.
By verifying, improve the accuracy of the ABCD pattern
In ABCD pattern trading, 'verification' is a very crucial step. Simply drawing out the pattern is far from enough; you also need to use other tools to confirm whether it truly exists. Proper verification can significantly increase the probability of trading success.
Common verification methods include:
✔ Volume analysis: Pay close attention to the volume changes in the CD segment. If the volume increases in the CD segment, it indicates strong momentum towards the expected breakout; if the volume gradually decreases during the BC retracement phase, it may enhance the reliability of the pattern.
✔ Market environment: Combine with larger trend levels. If the ABCD pattern appears in an upward trend, it is more likely to evolve into a continuation of the rise; if it appears in a downward trend, it is more likely to indicate a trend reversal.
✔ Auxiliary indicator confirmation: Can be used in conjunction with RSI, moving averages, and other indicators to confirm whether the market is in overbought or oversold conditions, as well as the overall trend direction, adding another layer of 'insurance' to the pattern.
Through these verification methods, traders can effectively filter out low-quality patterns and focus their energy on higher probability opportunities.
Comparison of bullish and bearish ABCD pattern characteristics:
This table focuses on demonstrating the core differences between bullish and bearish ABCD patterns, mainly comparing aspects such as pattern structure, Fibonacci relationships, volume changes, and confirmation signals. Understanding these differences is key to accurately identifying and trading ABCD patterns.
The following infographic further illustrates the importance of Fibonacci retracement ratios in ABCD pattern trading.
Recognizing these retracements is crucial for accurately confirming the pattern and reasonably setting take-profit and stop-loss positions. Of course, in highly volatile markets, even if the 'ideal ratio' is not fully met, some patterns still have trading value, but these opportunities need to be handled more cautiously and combined with more confirmation signals.
Timing of entry: The key to determining success or failure in trading
Even if the pattern structure is perfect and verification is sufficient, if the timing of entry is not right, it can still lead to losses. Therefore, grasping the rhythm of entry is a very core part of ABCD pattern trading.
✔ Entry at point D (conventional practice): The most common method is to enter near point D, anticipating a trend reversal. If you can wait for additional confirmation signals, such as reversal candlestick patterns or effective breakthroughs/breakdowns of trendlines, it often significantly enhances the risk-reward ratio.
✔ Early entry (aggressive type): Some traders may choose to enter before point D is fully formed, hoping to capture a larger market movement. This approach has higher potential rewards, but the risks are also significantly amplified, so strict stop-loss settings are necessary.
✔ Delayed entry (conservative type): A more conservative approach is to enter after the price truly breaks the pattern structure from point D, to confirm that the reversal has occurred. This method has lower risks but usually gives up part of the initial movement.
By continuously practicing these verification methods and entry rhythms, traders can significantly enhance their ability to identify and grasp high-winning-rate ABCD patterns. However, it should be emphasized that this 'proficiency' comes from long-term practice, patience, and an overall understanding of market structures.
The power of Fibonacci: The mathematical advantage in ABCD trading
The ABCD pattern itself is not difficult to identify on charts, but what gives it trading advantage is its combination with Fibonacci ratios.
The Fibonacci ratio originates from a mathematical sequence, providing an objective verification framework for the ABCD pattern, helping traders more accurately determine entry and exit positions.
This not only helps set reasonable take-profit targets but also optimizes risk control while filtering out those low-reliability patterns, focusing only on high-probability opportunities.
The most critical Fibonacci ratio in ABCD trading
In ABCD pattern trading, several groups of Fibonacci ratios are particularly important; they are used to locate potential turning points and are also important references for take-profit and stop-loss.
✔ BC segment: Typically retraces 61.8% – 78.6% of segment AB
✔ CD segment: Ideally extends to 127.2% or 161.8% of segment BC
These ratios are not coincidental but reflect the repeating emotional rhythms and trading behavior patterns in the market.
Use Fibonacci to verify the ABCD pattern
Fibonacci ratios can effectively help you confirm whether an ABCD pattern is 'reliable.'
If the BC retracement significantly deviates from the 61.8%–78.6% range, it may indicate that the pattern lacks strength; similarly, if the CD segment does not reach the expected 127.2%–161.8% extension target, caution is required.
This does not mean that the pattern is definitely invalid, but it must be combined with other technical tools for secondary confirmation. Combining Fibonacci analysis with other technical indicators (such as trend structure, momentum indicators, platform tools, etc.) can significantly enhance trading confidence.
The application methods of Fibonacci in practice
Fibonacci is not a 'theoretical tool' but a practical method that can be directly applied. It can help you project reasonable take-profit goals and scientifically set stop-loss positions based on pattern structures to control losses if the pattern fails.
For example, in the bullish ABCD pattern, stop-loss can usually be set below point A; in the bearish ABCD pattern, it can be set above point A. Truly mastering these ratios is key to achieving 'profit maximization + risk minimization', which requires repeated practice and continuous verification in real or simulated trading.
Truly effective ABCD trading strategies
Understanding the psychological logic and Fibonacci ratios behind the ABCD pattern is just the foundation; what truly distinguishes traders is their execution ability. Stable profits do not come from occasionally seizing a beautiful pattern but from repeatedly and rationally executing the same logic in different market environments.
Timing of entry determines the upper limit of profit
In the ABCD pattern, when to enter the market is often more important than 'where to enter the market.'
✔ Entry at point D (mainstream practice): Waiting for reversal confirmation near point D is the most common and safest strategy. Confirming signals through reversal candlesticks or trendline breakthroughs helps improve the risk-reward ratio. This practice is intended to confirm that a reversal has occurred before capital truly enters.
✔ Early entry (aggressive type): Enter slightly earlier before point D is fully formed, aiming to capture a larger potential market movement. This method carries higher risk but also offers greater potential rewards. When adopting this strategy, strict stop-loss settings must be made; otherwise, a single mistake could incur significant costs.
✔ Delayed entry (conservative type): Enter after the price effectively breaks through point D and confirms the reversal. This method can reduce the risk of incorrect judgments, but the cost is that you may miss part of the initial price movement. It emphasizes confirmation rather than taking profits ahead of time.
To better understand the various components of the ABCD pattern trading strategy, we can systematically organize them through tables.
Overview of key elements in ABCD pattern trading strategies:
This table summarizes the different entry methods and key elements in ABCD pattern trading, while also pointing out common traps and important factors that determine trading success or failure.
Flexibly adjust strategies according to different market environments
Successful ABCD pattern traders adjust their tactics based on different market conditions. There is no one-size-fits-all method that can be applied to all market conditions.
✔ Trend market: In strong trends, the CD segment often exceeds common Fibonacci extension ratios (such as BC's 127.2% or 161.8%). At this time, traders can choose to move the stop-loss or adopt a gradual take-profit approach to gradually lock in profits during the continuation of the trend.
✔ Consolidating market: In the phase of range consolidation, the ABCD pattern often reflects short-term reversal signals within the range. At this time, profit expectations should be lowered, tighter target positions should be set, and one must be prepared for quick reversals. It is particularly important to combine the ABCD pattern with key support and resistance levels.
✔ High volatility market: In highly volatile markets, price movements are often irregular, and Fibonacci ratios are also harder to measure accurately. In this environment, more indicators should be used for confirmation, and stop-loss space should be appropriately widened to cope with additional risks brought about by volatility.
Differences in execution methods in different markets
Professional traders adjust the execution details of the ABCD pattern according to the type of market they are trading in.
✔ Forex market: The forex market operates almost around the clock, and the ABCD pattern appears frequently. Traders usually use it in conjunction with candlestick patterns and prioritize liquidity in major currency pairs.
✔ Stock market: In the stock market, the ABCD pattern is often used to capture swing trading opportunities. Many traders combine fundamental analysis and financial report information to improve decision-making quality.
✔ Cryptocurrency market: The cryptocurrency market is highly volatile, and risk control must be emphasized even more when trading ABCD patterns. Wider stop-loss settings and more confirmations from technical indicators are particularly important in this market.
By mastering these execution skills, traders can significantly enhance the overall success rate of ABCD pattern trading. The key to long-term stable profits is not to completely avoid losses but to repeatedly seize high-probability trading opportunities under the premise of controlling risks.
And this cannot be separated from continuous practice, constant adjustment, and an overall understanding of the market.
The risk management secrets of professional ABCD traders
To achieve long-term, stable profits through the ABCD pattern, the key is not just to find a 'perfect entry point,' but more importantly, whether the risk management is solid enough. This means protecting the principal when inevitable losses occur; and in correct trades, maximizing profits as much as possible.
You can imagine professional traders as professional gamblers. They clearly understand where the odds in the casino lie, so they manage their funds extremely rigorously to ensure they can stay at the table. When professional traders use the ABCD pattern, they essentially follow the same thinking.
Protective stop-loss based on pattern structure
Unlike arbitrarily setting a fixed stop-loss ratio, professional traders' stop-losses are directly based on the ABCD pattern structure, which makes risk control more reasonable and effective.
✔ Stop-loss position setting: In the bullish ABCD pattern, stop-loss is usually placed below point A, which is a key support level. Once the price effectively falls below here, it means the pattern has failed, and one must decisively exit. In the bearish ABCD pattern, the stop-loss is placed above point A.
✔ Dynamic stop-loss (trailing stop-loss): When the market develops as expected, the stop-loss can be continually adjusted upwards (or downwards) along with the price, both locking in existing profits and allowing the trend to continue as much as possible. This method allows for capturing larger market movements while effectively preventing pullbacks caused by sudden reversals.
This structure-based stop-loss method makes risk management more flexible, adapting to different ABCD pattern environments.
Dynamically adjust positions for each trade
Position control is another extremely crucial aspect of risk management. Professional traders never use the same position for every trade but flexibly adjust their capital investment according to the risk levels of different ABCD patterns.
✔ Volatility factors: In highly volatile markets, positions are actively reduced to limit losses from individual trades.
✔ Degree of certainty: If an ABCD pattern receives more confirmation signals (such as trend, support and resistance, indicator resonance), traders may appropriately increase their position. However, even so, risks still need to be controlled within a bearable range.
This flexible position management method helps optimize the risk-reward ratio while protecting account safety in different market environments.
Asymmetric risk-reward ratio and emotional discipline
Professional ABCD traders often deliberately pursue asymmetric risk-reward structures, which means: small losses, big gains. For example, a 1:3 risk-reward ratio means for every dollar at risk, they aim for three dollars of potential profit.
✔ Gradual entry and exit (adding or reducing positions): During the trading process, some traders adopt a gradual entry and gradual take-profit approach to progressively optimize risk structure while improving overall returns.
✔ Emotional control: Ultimately, the most difficult aspect of risk management is not technical but emotional. When the market moves against you, fear amplifies; when profits increase, greed surfaces. True professional traders can strictly implement their plans rather than be led by their emotions.
As long as you can consistently adhere to the pre-set risk rules, over the long term, advantages will naturally emerge. By combining these risk management principles with the technical advantages of the ABCD pattern itself, traders can greatly enhance the consistency and long-term profitability of their trading. Technical analysis + risk management is indeed the foundation of a stable trading system.
This is the trading experience that Yan An shared with everyone today. Many times, you lose many opportunities to make money because of your doubts. If you do not dare to boldly try, engage, or understand, how will you know the pros and cons? You only know how to proceed after taking the first step. A cup of warm tea, a piece of advice, I am both a teacher and your talkative friend.
Acquaintance is fate, and understanding is separation. I firmly believe that those destined to meet will eventually do so, while those who miss each other are bound by fate. The journey of investment is long; temporary gains and losses are just the tip of the iceberg. One must know that even the wisest can make mistakes, and the darkest can find opportunities. Regardless of emotions, time will not stop for you. Pick up the burdens in your heart, stand up again, and move forward.
The martial arts secret has been given to everyone; whether you can become famous in the arena depends on yourself.
These methods must be saved by everyone. If you find them useful, please share them with more people around you who trade cryptocurrencies. Follow me for more insights into the crypto space. After getting wet, I am willing to hold an umbrella for the chives! Follow me, and let’s walk together on the road of cryptocurrency!
