What Is The Crab Pattern & How To Trade With It

Crab Pattern

The Crab is a type of Harmonic pattern that stretches at point D and defines a potential reversal. Developed by Scott Carney in 2001, it is one of the most precise Harmonic patterns considered by the author.

What is the Crab pattern?

Like other Harmonic patterns, the Crab has a five-point structure—these points, known as legs, forms with the help of Fibonacci numbers and ratios.

The difference between Crab and other Harmonic patterns is that the PRZ (potential reversal zone) expands at the point D. This expansion reaches beyond the X leg. The PRZ is a region where three or more Fibonacci numbers converge and form the Harmonic pattern.

This is how the pattern looks like on the chart:

Crab pattern on a chart
Crab pattern on a chart

To identify the Crab, traders must know its calculations. They are:

  • The AB leg retraces between 38.2% to 61.8%.
  • BC retraces at 38.2% to 88.6% of the AB leg.
  • CD extends up to 161.8% of XA and extends 224% to 316% of the AB leg.
  • The pattern completes at point D, where traders take their positions.

The Crab looks similar to the Butterfly pattern. The difference lies in their measurements.

The Crab has one variation, which is called the Deep Crab pattern. The Deep Crab evolves from the Crab and the invalid Bat patterns. Though the Deep Crab looks identical to the Crab, the Deep Crab should retrace 0.886 at the B leg.

How to use the Crab pattern?

To implement the Crab pattern, one must familiarize himself/herself with its bullish and bearish patterns.

a. Bullish Crab pattern

The bullish Crab emerges in an uptrend and signals a price reversal at point D. Traders take their long positions at point D, and profit-targets are set at point CD.

Bullish Crab Pattern
Bullish Crab Pattern

b. Bearish Crab pattern

The bearish Crab in the downtrend at identifies a price reversal at point D. Traders take short positions at point D and set their profit-targets at CD leg.

According to Scott Carney, the price action in the Crab is most extreme of all Harmonic patterns. This means its highly volatile. Besides this, there are no definite stop-losses. So, to place a stop-loss, one should look for the furthest projections. In other words, traders must wait for the highs and lows to be formed and set above/below these levels.

Sometimes the Crab can leave traders astray by giving false signals. This happens mostly on shorter timeframes. The best way to handle this issue is to wait for the Crab to fully appear, and take trading positons after point D.

Bearish Crab Pattern
Bearish Crab Pattern

Crab pattern trading strategy

The Crab pattern requires patience on the trader’s part, as it can take time to surface correctly. Traders may look for the Crab pattern on any timeframe according to their own individual trading needs.

Crab pattern buy strategy

  • Locate the pattern in an uptrend.
  • Wait for the price bar to go bullish before entering.
  • Enter the trade at point D or after it.
  • Set a stop-loss near the recent low.
  • Exit the trade before the price drops.

Crab pattern sell strategy

  • Look for the pattern in a downtrend.
  • Wait for the price bar to go bearish before entering.
  • Enter the trade at point D or after it.
  • Set a stop-loss near the recent high.
  • Exit the trade before the price rises.

Crab pattern conclusion

The Crab pattern does give entry and exit points, but it can be complicated for new traders. Traders may combine the Crab pattern with momentum oscillators to confirm the price reversal.

The Crab Pattern can be used on your trading platform charts to help filter potential trading signals as part of an overall trading strategy.