What Is The Shark Pattern & How To Trade With It

Shark Pattern

The Shark pattern is a type of Harmonic pattern that describes the immediate change in price action after its formation.

Introduced by Scott Carney in 2011, the Shark pattern is a later addition to the Harmonic pattern family.

What is the Shark pattern?

The Shark pattern consists of five swing points (X, A, B, C, and 0), also known as legs, and depends upon Fibonacci ratios and levels. The Shark pattern looks similar to the 5-0 pattern.

You can check more on Fibonacci numbers and ratios and how they are calculated here.

The Shark is different from other Harmonic patterns as it relies on 88.6% and 113% ratios. Once the pattern develops, the price quickly moves between the support and resistance levels. A trader failing to comply with these rules lose the trading opportunities. For example, a trader can’t wait and take the trading position later. After the pattern establishes, he/she needs to act rapidly.

Here’s what the pattern looks like on a chart:

Shark pattern on a chart
Shark pattern on a chart

To identify the Shark pattern, a trader needs to remember a few rules. They are:

  • The AB leg extends the OX leg between Fibonacci ratios of 113% and 161.8%.
  • The BC leg reaches beyond the O by 113% of the OX leg.
  • The BC leg is an extension of the AX leg by ratios of 161.8% and 224%.

As the above chart illustrates, the pattern is different from the traditional M and W patterns. However, the trading principles remain the same as any other Harmonic pattern. Besides this, the extended AB leg forms an Extreme Harmonic Impulse wave.

How to use the Shark pattern?

To implement the Shark pattern, one must remember its variations; bullish and bearish.

Bullish Shark pattern

The bullish Shark pattern occurs after a downtrend and identifies a rapid upward movement of the price.

Bullish Shark Pattern
Bullish Shark Pattern

Bearish Shark pattern

The bearish Shark pattern emerges after an uptrend and shows a strong price decline.

Bearish Shark Pattern
Bearish Shark Pattern

For going long and short, traders enter the at 88.6% of the OX leg with profit-target at 61.8% of the BC.

Scott Carney suggested that the ratio of 88.6% is an Extreme Harmonic Impulse wave.

When traders take their position at the OX, there is a sharp upward movement in bullish Shark and downward movement in a bearish Shark. After that, the price goes against the trader’s will. But then the price retrieves and pushes itself in favor of a trader. Finally, a trader exits at the BC.

These highs and lows can make a trader uncomfortable because a trader may lose some of his profits. So, as mentioned earlier, swift actions are required on the trader’s part to take advantage of the Shark pattern.

Shark pattern trading strategy

For a trading strategy, traders may look for the Shark pattern on any timeframe according to their own individual trading needs.

One way to involve the Shark pattern in a trading strategy is to use it in conjunction with other technical indicators.

Shark pattern buy strategy

  • Locate the pattern after a downtrend.
  • Wait for the price bar to go bullish before entering.
  • Enter the trade at the OX leg.
  • Place a stop-loss at the recent low.
  • Exit the trade at the BC leg.
Shark pattern buy setup
Shark pattern buy setup

Shark pattern sell strategy

  • Look for the pattern after an uptrend.
  • Wait for the price bar to go bearish before entering.
  • Enter the trade at the OX leg.
  • Place a stop-loss near the recent high.
  • Exit the trade at the BC leg.
Shark pattern sell setup
Shark pattern sell setup

Shark pattern conclusion

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