Created by Bryce Gilmore, the perfect Butterfly pattern - here are the rules of engagement for this pattern:
Rule 1: The Butterfly Pattern begins with a market move/impulse leg that establishes our X and A points. Once X and A points have been identified, we then look at rule 2...
Rule 2: The Market forms B completion point by fulfilling at Least 78.6% retracement of the XA leg. AB move remains valid as long there is at least a 78.6% retracement of XA and does NOT close above the 88.6%
Rule 3: If rule 1 and 2 has been met, then the market forms the C completion point by fulfilling at least a 38.2% retracement of the AB leg. Point C remains valid as long as there is at least a 38.2% retracement of AB and there is not a candle close at or beyond the 88.6% retracement of AB.
Rule 4: If rule 1,2 and 3 have been met, then the market forms the D completion (this will be the entry point) by fulfilling a 127.2% extension of XA. In a valid CD move, the 127% retracement of XA shows ratio confluence with the 161.8% of AB. The D completion point must extend past X
Trade Rules/Trade Management: Entry at D, stop loss 141.3% extension of XA and target 61.8% retracement of AD