1. Introduction to the Dragon harmonic pattern
The Dragon harmonic pattern is one of the most powerful yet underutilized harmonic patterns, offering:
✔ Extremely precise reversal signals (80%+ accuracy)
✔ Unique Fibonacci ratio combinations
✔ Strong risk-reward potential (1:3+ ratios)
✔ Works across all liquid markets (Forex, stocks, crypto)
Key Feature: The pattern combines elements of both Crab and Bat patterns for superior accuracy.
2. Dragon harmonic pattern Structure & Key Fibonacci Ratios
The Dragon follows a 5-point structure (X-A-B-C-D) with these critical Fibonacci relationships:
| Wave | Fibonacci Requirement | Trading Significance |
|---|---|---|
| AB | 38.2%-61.8% of XA | Initial retracement |
| BC | 0.882%-1.13% of AB | Sharp extension |
| CD | 0.382%-0.882% of BC | Must reach 88.6%-113% of XA |
Bullish vs. Bearish Dragon
- Bullish Dragon: Forms at potential bottoms (Buy at D)
- Bearish Dragon: Forms at potential tops (Sell at D)
3. Step-by-Step Identification Guide
- Identify XA Wave: Strong impulse move
- Measure AB Retracement: Must be 38.2%-61.8% of XA
- Track BC Extension: Should reach 0.882%-1.13% of AB
- Confirm CD Extension: Critical 0.382%-0.882% of BC
- Validate D Point: At 88.6%-113% of XA
Visual Tip: The pattern forms a distinctive “dragon wing” shape on charts, with point D as the reversal trigger.
4. Trading Strategy & Execution
Optimal Entry Points
- Enter long/short at point D with confirmation:
- Bullish: Hammer/pin bar + RSI divergence
- Bearish: Shooting star + RSI divergence
Stop Loss Placement
| Pattern Type | Stop Loss Position |
|---|---|
| Bullish Dragon harmonic pattern | Below recent swing low |
| Bearish Dragon harmonic pattern | Above recent swing high |
Take Profit Targets
| Target | Fibonacci Level | Action |
|---|---|---|
| TP1 | 38.2% of AD | Take 50% profit |
| TP2 | 61.8% of AD | Take 30% profit |
| TP3 | 100% of AD | Close remaining |
5. Confirmation Techniques for Higher Accuracy
✔ Price Action:
- Bullish: Engulfing pattern + volume spike
- Bearish: Dark cloud cover + volume spike
✔ Indicator Confluence:
- RSI divergence (must)
- MACD histogram reversal
✔ Volume Analysis:
- Increasing volume at pattern completion
✔ Timeframe Alignment:
- Confirm with higher timeframe trend
6. Dragon vs. Other Harmonic Patterns
| Feature | Dragon Pattern | Crab Pattern |
|---|---|---|
| CD Extension | 161.8%-224% BC | 224%-361.8% BC |
| XA Relation | 88.6%-113% XA | 1.618% XA |
| Accuracy | 80%+ | 75% |
| Frequency | Moderate | Rare |
7. Professional Trading Tips
- Patience Pays: True Dragon patterns are uncommon but high-quality
- Multi-Timeframe Analysis: Confirm on daily + 4H charts
- News Filter: Avoid around major economic releases
- Backtesting Essential: Test on 50+ historical examples
- Position Sizing: 1-2% risk per trade maximum
8. Frequently Asked Questions (FAQ)
Q1: Why is the Dragon pattern so effective?
A: Its unique combination of Crab and Bat pattern elements creates highly precise reversal zones.
Q2: Best markets for Dragon patterns?
A: Works exceptionally well in EUR/USD, XAU/USD (Gold), and BTC/USD.
Q3: How to avoid false signals?
A: Require:
- Precise Fibonacci ratios
- Clear reversal candles
- Supporting indicators
Q4: Optimal timeframes?
A: Most reliable on 4H and Daily charts.
9. Conclusion & Next Steps
The Dragon harmonic pattern provides traders with:
✅ High-probability reversal signals
✅ Excellent risk-reward ratios
✅ Clear structural rules
Recommended Action Plan:
- Study 30+ historical examples
- Paper trade for 2 weeks
- Develop personal confirmation checklist
- Start live trading with small sizes
- Be ware of Economic News .
🚀 Pro Tip: Combine with Ichimoku Cloud for trend confirmation.
Best Product To detect harmonic patterns : ON Trade Waves Patterns.
Example :
