AB = CD Price Action Strategy

This strategy is a bit different from all the other strategies that I use. The reason is that it is based more on market psychology rather than on the institutional activity. I personally use it as a confirmation of my main (institutional and volume-based) strategies. 

Still, it is very good strategy even if you use it as a standalone strategy. The main idea behind it is that the markets move in a sort of waves. The highs/lows of those waves or swings have names (A, B, C, and D). It goes like this: 

1. The distance from A to B is the distance from the first to the second swing point.
2. The C is made if there is a retrace at least to 50 % to distance from AB. However, the price must not go past A. 
3. The D is placed the same distance from C as A is from B. Because of this the pattern is called AB = CD. The leg AB has the same pip distance as the leg CD. 
4. If it is a bullish AB = CD, then you enter a long trade at the D. If it is a bearish AB = CD, then you enter a short position at the D.

To make this more clear, here are bullish and bearish AB = CD schemes:

You can trade this setup basically on all timeframes. I look for this pattern on 30-minute or 1- hour charts, 4-hour charts, Daily charts and weekly charts. I usually don't look for this pattern on lower timeframes than 30-minute timeframes.

Best thing to measure the distances between the swing points is with the Fibonacci tool. First, you place the Fibonacci so that 0 % is at A and 100 % is at B. Then you make sure the C is more than 50 % of this distance. After that, you move the fib tool (without changing the measured distance) so the 0 % is at C. The 100 % of the Fibonacci will show you where D is (this is the place where you enter your trade).

This is how you find the D in two steps:

Step 1: Use the Fibonacci to significant swing points making A and B and finding C below 50 % (in case of a Bearish AB=CD):

Step 2: Place the 0 % to C. Don’t change the measured AB distance. This way you will find the D which is at 100 %. From this place (D) you will enter a short trade:

Here are some real trade examples of the AB = CD pattern: 

Bullish AB = CD (EUR/USD, 60-minute timeframe)

Bearish AB = CD (EUR/USD, 240-minute timeframe)