The Cypher Pattern Trading Strategy teaches you how to correctly trade and draw the cypher pattern. You can use the cigar harmonic pattern on its own and have a profitable Forex trading strategy.

It is not a mystery that geometric patterns are in the Forex price chart. And the cigar pattern is a very good representation of that. The Cypher pattern forex is part of the harmonic trading patterns and is the most exciting harmonic pattern. This is because it has the highest win rate.

 

 

Our team at Trading Strategy Guides is putting together a step-by-step tutorial on Harmonic Trading Patterns. We recommend that you read the introduction to harmonic patterns. Read the article here, Harmony Pattern Trading Strategy – Easy Step by Step Guide.

It is essential to read the introductory article on the harmonic patterns. This will give you a better understanding of this. We also have training on how to trade the Gartley pattern.

The Cypher pattern forex works in every market and on any time frame. Our team at Trading Strategy Guides recommends that you avoid the lower time frames. Stick only to the higher time frames, preferably the 4h and the daily chart. We want to make sure our readers are satisfied.

So, if you mainly trade in the lower time frame, don’t miss the chance to read the best strategy for stochastic trading – easy 6-step strategy. Lately, this article has received a lot of attention from our readers.

In your efforts to help you trade the harmonic patterns, we will provide you with the necessary tools and information to be successful. In this regard, we are going to have a series of strategies that trade other harmonic patterns, such as:

  • ABC Bullish / Bearish
  • AB = CD Bullish / Bearish
  • 3-Drive Bullish / Bearish
  • Gartley Bullish / Bearish
  • Butterfly Bullish / Bearish
  • Bat Bullish / Bearish
  • Crab Bullish / Bearish
  • Hey Bullish / Bearish

First, let’s look at the indicators needed to successfully trade the Cypher Pattern trading strategy.

To better identify the cigar pattern forex and to draw sippers patterns, you should use the Harmonic Pattern Indicator (see Figure below). You can find the Harmonic Pattern indicator on the most popular Forex trading platforms (TradingView and MT4) in the indicators section.

Don’t forget that you have to draw the Cypher pattern yourself. Be sure to check that it matches the Fibonacci rules. In the following paragraphs we are going to discuss this in more detail. Also read my personal trading plan reviewed by Kim Krompass.

Now let’s move forward and define the Cypher pattern forex.

What is the Cypher Pattern Forex?

In the harmonic pattern world, the Cypher pattern forex is a reversal pattern with four legs. The pattern follows specific Fibonacci ratios. The Cypher pattern forex appears less frequently than other harmonic patterns. This is because it is difficult to satisfy the market price to such rigid Fibonacci ratios. The Cypher pattern forex must comply with the following Fibonacci rules:

  • AB = 0.382 to 0.618 retracement of the XA swing leg;
  • BC = extended to minimum 1.272 and maximum 1.414 of the XA swing leg;
  •  CD = pull back to 0.786 of the XC swing leg;

Definition of the strategy

The first rule of the Cypher Pattern Forex is that the retracement must come down from X to A. It should touch the 0.382 Fibonacci ratios but cannot close below the 0.618 Fibonacci ratios. Between the 0.382 and 0.618 Fibonacci retracements of XA swing leg, we have our third point of the Cypher pattern, named ‘B.’

The next rule of the Cypher pattern forex is a Fibonacci extension of the XA leg. It comes in 1.27, but it is not higher than the 1.414 Fibonacci ratios. This swing point is called ‘C’ and completes the BC swing leg of the Cypher pattern forex. The final point of the Cypher pattern, where our orders will be executed, is at the end point D. The point D is located at the 0.786 Fibonacci retracements of the entire move started from X to C.

Cypher pattern trading strategy

You are now learning how to trade the Cypher pattern with a very simple set of rules. They will try to minimize risks and maximize profits. There is one more important step to learn before defining the rules for the Cypher pattern trading strategy. First, we will give you pointers on how to apply the Harmonic Pattern Indicator.

 

 

Step # 1 How to draw zipper patterns

I will guide you step by step through this process. You should follow this simple guide and see the figure below for a better understanding of the process.

  • First click on the harmonic pattern indicator. The indicator is on the right side toolbar of the TradingView platform. In the MT4 terminal, you can locate the harmonic pattern indicator in the Indicators library.
  • Identify the starting point X on the chart, which can be any swing high or low point on the chart.
  • After finding your first swing high / low, simply follow the market wave movements.
  • You should have 4 points or 4 high / low points that stick together and form the Forex harmonic patterns. Each swing leg must be powered and must conform to the Fibonacci ratios above as indicated.

Now we are going to review the rules of the trading strategy for the pattern of Cypher.

See below…

Step # 2 Buy entry: buy as soon as the CD swing leg reaches 0.786 retracement of the XC swing leg.

From a risk management point of view, the Cypher pattern is possibly the most exciting harmonic pattern. This is because it has the highest win rate. Our backtesting results have consistently proven that the cypher pattern forex is a very reliable harmonic pattern.

Then buy with a market order at the opening candle before the completion of the D point at 0.786 Fibonacci retracement of the XC leg. Once the market touches the 0.786 level, we assume that wave D is in place, because we cannot determine how far the market will go. We are only concerned with satisfying the Fibonacci ratios.

We can note that the price had only a small deviation below the 0.786 Fibonacci ratio – our entry point.

The next important thing we need to determine is where to place our protective stop loss.

See below…

Step #3 – Stop Loss: Place the protective stop loss below wave X.

For the Bullish Cypher pattern, you usually want to place your protective stop loss below the point X. This is the logical place to hide your stop loss. This is because any interruption below automatically voids the trade.

We need to determine the most logical place for our profitability level in the Cypher pattern strategy.

See below…

Step #4 Bullish Cypher Pattern Forex – Take Profit: take profit as soon as we reach point A

The trading strategy of Cypher patterns is a reversal strategy. We want to make sure we capture as much of the new trend as possible. If you are not a fan of reversal strategy, and you prefer trend following strategy, we advise you to follow the MACD trend following strategy – Simple to learn trading strategy. The strategy has attracted a lot of interest from the Forex trading community.

The Cypher pattern has a conservative take profit objective. We want to take profits as soon as we reach point A of the pattern.

Why are we taking profit so early?

For the majority of the harmonic patterns, it is best to lock in the gains as soon as possible. Since the Cypher pattern is one of the most profitable harmonic patterns, we can give it more room for the price action to breathe. We have the chance to see at least a retest of wave A.

Note ** The above was an example of a BUY trade using the Bullish Cypher pattern strategy. Use the same rules for a SELL trade. In the figure below you can see a real example of SALE.

Look:

Closure

The rules of the Cypher pattern strategy are quite simple. Although it has a higher win ratio than the other harmonic patterns, the Harmonic Cypher structure is very rarely seen on the chart. We must take full advantage of the cases that arise.

We hope that the rules of the Cypher pattern trading strategy were clear and concise. If you have any more questions, leave them in the comment section below. Also give this strategy a 5 star if you enjoyed it!

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