The principle of the AB=CD trading method is that in a continuous rising or falling market, each pullback or rally is similar in distance to the recent previous pullbacks and rallies. Generally, the length of the CD segment is 1.27 times or 1.618 times the length of the BC segment. Alternatively, the length of the CD segment can be predicted by measuring the length of the AB segment. As the name of this trading method suggests, AB=CD means that the upward or downward distance of the AB segment is roughly consistent with that of the CD segment. Through this market rule, we can use the upward or downward distance of the AB segment to determine the upward or downward distance of the CD segment, thereby identifying profit-taking points to maximize profits.
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The downward length of the AB segment is equal to the downward length of the CD segment, and the CD segment is generally 1.272 to 1.618 times the extension of the AB segment. The position of point C is at the 38.2%, 50%, 61.8%, or 78.6% retracement levels of the AB price; point C cannot exceed point A and must remain within the price range of AB. AB=CD is a simple yet powerful technical trading pattern. Although various conditions may make it seem complex, once learned, it can greatly assist our trading.
