HARMONICAL STANDARDS ANALYSIS METHOD

[Igor Pereira]

Harmonic Standards in the Financial Market

The Mathematical Base of Structural Reversions

By Igor Pereira
Financial Market Analyst
Founder of ExpertFX School

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Harmonic patterns are one of the most technical and mathematically structured methodologies of modern graphical analysis.

Its basis was established by H.M. Gartley, which presented the first formal studies on the subject in his book Profits in the Stock Market, published 1932.

Since then, the methodology has evolved, being refined with the application of the proportions of Fibonacci and integrated to institutional strategies of reversal.

Exclusive analysis for ExpertFX School – Igor Pereira:
“Harmonic patterns are not drawings on the chart. They are mathematical projections of repetitive human behavior.”

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What Do Harmonic Standards Indicate?

The essence of harmonic patterns is to predict movements based on specific mathematical proportions.

They were developed to:

This allows the trader to identify reversal zones with a high degree of accuracy — known as PRZ (Potential Reversal Zone).

These areas represent areas where:

• The price is statistically extended;

• The structure is ripe;

• The probability of correction or reversal increases significantly.

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Mathematical Fundamentals

Harmonic patterns are mainly based on:

• following Fibonacci;

• In exact proportional relations between legs of movement (AB, BC, CD);

• in structural symmetry;

• In fractal repetition of market behaviour.

In gold (XAU/USD), highly technical active and sensitive to institutional flow, harmonic patterns work more efficiently when aligned with:

• institutional liquidity;

• Order Blocks;

• Fair Value Gaps;

• Macroeconomic structure.

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Why Do They Work?

The market consists of collective human behavior.

And human behavior is repetitive.

The harmonic proportions represent:

• market rhythm;

• Structural exhaustion;

• Expansion and natural price shrinkage;

• Statistical imbalance points.

When multiple Fibonacci projections converge into a single zone, a PRZ with high reaction probability is created.

Igor Pereira highlights:
“Harmonics do not anticipate the market by divination. They anticipate by mathematics.”

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What to Expect when Applying Harmonic Patterns?

When applied correctly, the trader can expect:

• Entries with controlled risk;

• Short technical stops;

• Excellent risk-return ratio;

• Greater precision in structural reversals.

However, it is essential to understand:

Harmonic patterns should not be operated alone.

They need:

• structure confirmation (BOS);

• institutional confluence;

• Volume analysis;

• Macroeconomic context.

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Impact on the Financial Market

In high volatility scenarios — such as:

• interest decisions;

• Inflation data;

• dollar movements;

• geopolitical tensions;

Harmonic patterns may indicate:

• trend exhaustion;

• relevant technical corrections;

• Start of new directional leg.

In XAU/USD, this is particularly relevant, as gold responds quickly to changes in global flow.

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Fundamental Concepts Before Moving On

Before applying any harmonic pattern, the trader must master:

• Retractions of Fibonacci;

• Projections and extensions;

• market structure;

• Identification of swing highs and swing lows;

• Institutional context.

Without these foundations, the pattern becomes just a graphic design — not a strategic tool.

1. KNOW YOUR RETRACTIONS AND FIBONACCI EXTENSIONS
If there is something you absolutely need to have a solid understanding before jumping to the harmonic patterns, you need to know how the retractions and extensions of Fibonacci work. If you don’t know your “lies”, stop reading now, check out this article from Investopedia about Fibonacci numbers and come back.

Most traders are familiar with the retractions of Fibonacci (which we explain here – click ): 23.6%, 38.2%, 61.8% and 78.6% and up to 50% (which is not a Fibonacci index). Fibs are commonly used to measure the depth of price retractions from peak to valley. Fib extensions may be less popular (e.g. 161.8%, 261.8% and 423.6%). But if you can understand one, then you can easily understand the other.

2. A GEOMETRY OF LIES
Most retractions and extensions of Fibonacci are used to measure (or design) prices along a vertical grid (such as an XY grid). They measure the price down or up. What makes harmonic patterns unique is that they geometrically bend lies in their own pattern.

Right now, you're probably trying to visualize what we just wrote, and that's probably driving you crazy. No problem. It will be much easier to understand when we examine each pattern. For now, remember that Fibonacci retractions and extensions are fundamental to understanding how harmonic patterns are formed.

3. THE MOST HARMONIC STANDARDS ARE BASED ON 5 PRICE TABLES
Remember this sequence: X, A, B, C and D.

X is the price at which the pattern begins.
A is the next price point (up or down) of X
B is a retraction of X and A
C is a retraction of A and B
D is the last price and also the action zone or trigger .

This is usually how it works: you must measure each price range, making sure it is aligned with a specified Fibonacci model (depending on the harmonic pattern). If points X, A, B and C are up, then your action zone is in D.

4. Should I follow the rules in a striding or FLEXIBLE way?
Before we get into the real rules, we need to address how traders usually interpret the rules. If you have read different articles on harmonic negotiation, you must have noticed something funny: among the traders who insist on following the rules (e.g., Fib measurements) in a “strita” way, many of them seem to be at odds with each other. Like everyone's following different rules.

So ultimately, it's up to you to follow or violate the rules. Will you allow the model to choose a reality or allow a reality to double the model?

5. THE FOUR MOST COMMON HARMONIC STANDARDS
There are four primary harmonic patterns. The first is Gartley (the image we provide above). This is the pattern that HM Gartley presented in his 1932 book. The next three are Gartley variations: Butterfly, Bat and Crab.

Each pattern has a high and low version, where you can assume a long or short position, respectively. Each pattern has a unique set of Fibonacci measurements that distinguish between them.

HARMONIC STANDARD 1: THE GARTLEY

Description and rules:

AB retraction (of XA) should be at or close to 61.8%.
BC can redo 38.2% to 88.6% of AB, but should NOT exceed 88.6% (so “maximum”).
CD may extend from 113% to 161.8% (max.) the length of AB, but should not exceed 78.6% of XA.
If all the above criteria are met, then D is the action zone to operate purchased in a high standard or sold in a low standard.
The stop loss can be placed below (or above if sold) of D.

HARMONIC STANDARD 2: THE BORBOLET

Description and rules:

AB (XA) retraction should be at or close to 78.6%.
BC can redo 38.2% to 88.6% of AB, but should NOT exceed 88.6%.
CD can extend the length of AB from 161.8% to 224%.
If all the above criteria are met, then D is the action zone to operate purchased in a high standard or sold in a low standard.
The stop loss can be placed below (or above if sold) of D.

HARMONIC STANDARD 3: THE DEATH

Description and rules:

AB (XA) retraction may be between 38.2% and 50%.
BC can redo 38.2% to 88.6% of AB, but should NOT exceed 88.6%.
CD may extend from 161.8% to 261.8% the length of AB, but should NOT exceed 88.6% of XA.
If all the above criteria are met, then D is the action zone to operate purchased in a high standard or sold in a low standard.
The stop loss can be placed below (or above if sold) of D.

HARMONIC STANDARD 3: THE CARANGE

Description and rules:

AB (XA) retraction may be between 38.2% and 61.8%.
BC can redo 38.2% to 88.6% of AB, but should NOT exceed 88.6%.
CD can extend the length of AB from 261.8% to 361.8%.
If all the above criteria are met, then D is the action zone to operate purchased in a high standard or sold in a low standard.
The stop loss can be placed below (or above if sold) of D.

FINAL WORDS
The theory of harmonic patterns may be complex, but the action procedures to identify and negotiate them are relatively simple.

I hope this article has helped clarify the complexity and simplicity of harmonic patterns...