Cypher Pattern: Rules, Ratios and How to Trade It

The cypher pattern is a five-point harmonic pattern, labeled with points X, A, B, C and D, in which point C goes beyond A and point D completes at the 0.786 retracement of the whole move from X to C. The setup buys or sells at D, depending on its direction, with the stop beyond X.

This guide gives the exact rules, a worked example with numbers, how to approach trading it, how it differs from its closest cousins, and an answer to the question that matters: does it work? We give our own test results, on every market, next to the choices the test required.

What is the cypher harmonic pattern?

The cypher pattern is a reversal pattern from the family of harmonic patterns: price structures in which each wave must follow specific Fibonacci proportions. Its signature is point C. In the Gartley, the Bat, the Butterfly and the Crab, C stays inside the first wave; here, C makes a new high above A in an advance, or a new low below A in a falling market. The last wave then gives back most of the move from X to C, and D is the price level where the pattern expects price to reverse.

The cypher harmonic structure is credited to Darren Oglesbee. It is not part of the original set defined by Scott Carney, who coined the term harmonic trading, but it uses the same XABCD frame, and free scripts in the TradingView public library detect it.

Understanding the XABCD structure and key ratios

The harmonic pattern has four waves between five turns, and each one has a specific role:

• X to A: the first wave (XA), a strong move up or down.
• A to B: the AB wave must retrace 0.382 to 0.618 of the first wave.
• B to C: the BC wave goes beyond A, so that the distance from X to C is 1.272 to 1.414 times the first wave. Looser versions accept 1.13.
• C to D: the last wave, which ends at the 0.786 retracement of XC. D stays inside the range between X and C.

The ratio that matters most is the last one: D is measured on XC, not on XA as in the Gartley. Draw the Fibonacci retracement from X to C, not from X to A. The figure above shows the long setup; the one in the Bullish vs. bearish cypher patterns section shows the opposite direction.

How to identify a cypher pattern on your chart

Start by identifying the five swing highs and lows, then check each Fibonacci proportion in order. If one fails, it is not this pattern: it may be one of the other XABCD patterns, or no pattern at all. For a long setup:

1. Mark a clear swing low (X) on the chart and the swing high that follows (A).
2. Check that AB retraces 0.382 to 0.618 of that first wave.
3. Check that C goes beyond A, to 1.272 to 1.414 of the first wave. Above 1.414, the setup is invalid.
4. Draw a Fibonacci retracement from X to C: the 0.786 price level is D.
5. Check that D is still above X: a complete pattern never goes below it.

The importance of the B point rule

Point B decides which of the types of harmonic pattern you are looking at. An AB move that gives back 0.382 to 0.618 of the first wave makes B a candidate; a B at 0.786 or deeper suggests other patterns, such as the Butterfly. Then C must go beyond A: if C stays below A, the Gartley or Bat measures apply instead.

Defining the reversal zone at D

With fewer conditions than the Gartley or the Crab, its reversal zone is mostly the 0.786 level of the move from X to C. In harmonic trading, the zone is read as stronger when it lines up with other levels: prior support and resistance levels, a round number, or an extension of BC. We have not tested these confluences. A tighter zone gives a narrower band to act in; our bench does not test whether tighter zones do better.

A worked example with numbers

Illustrative values, not a real chart. For a bullish cypher pattern, X is at 100 and A at 150, so the first wave is 50. B is allowed to retrace 0.382 to 0.618 of it; here it stops at 125, half the wave, inside the range. C rises to 163.6: the distance from X to C is 63.6, or 1.272 times the first wave. D at the 0.786 retracement is 163.6 minus 0.786 times 63.6, which is 113.6. D is above X, so the setup is complete and valid. The order waits at 113.6, and the setup is invalid below 100.

Bullish vs. bearish cypher patterns

There are two types. A bullish cypher pattern is built on rising swings: X is the low of the pattern, C its high, A and C make successive higher highs, and D is a higher low above X. You buy at D, expecting price to increase toward C.

A bearish cypher pattern is the mirror image on falling swings: X is the high, C the low, A and C make successive new lows, and D is a lower high below X. You sell at D. The Fibonacci ratios and the form are the same in both patterns, so you follow the same checklist.

The same example, mirrored: for a bearish cypher pattern, X is at 200 and A at 150, so the first wave is 50. B rebounds to 175, half of it. C falls to 136.4, so the distance from X to C is 63.6, or 1.272 times the first wave. D at the 0.786 retracement is 136.4 plus 50.0, which is 186.4. The sell order waits at 186.4, and the harmonic pattern is invalid above 200.

The psychology behind the pattern

The long version describes buyers who push price to a new high at C, above the first peak at A, followed by a loss of control. Supply takes over and price falls deeper than a normal pullback, but not through the support at X. Traders waiting at D bet that demand returns where most of the advance has been given back but the low of the move still holds. Whether this 0.786 retracement captures that better than any other pullback is a question for data, not for the story.

How to trade the cypher pattern

Entry point strategy

The standard plan is a limit order at the 0.786 level of the move from X to C, where the structure is complete. A more careful trader waits to follow the reaction at D: a candle such as a hammer or an engulfing, or a break of a small trendline on a lower timeframe, once the candle has closed. Keep in mind what our bench found on candlestick patterns alone: on 12,005 closed trades on daily hammers, the 2:1 trade reached its target 35.4% of the time against 36.1% for the same trade on random dates, a gap rated No clear edge: its average result per trade does not pass our statistical test.

Setting your stop-loss for risk management

Determining take-profit levels

The classic targets are the 0.382 and 0.618 retracements of CD. One plan closes part of the position at the first one and moves the stop to the entry price (breakeven), locking in some profits. With those numbers, CD is 50: the first target price is about 132.7 (113.6 plus 19.1) and the second about 144.5 (113.6 plus 30.9). With a stop at 99, the risk is about 14.6, so the first target pays about 1.3 times the risk and the second about 2.1 times. Those are the entry and exit points written before the trade.

Our bench tests one standardized version of this trade, with the same entry and target rules for every harmonic pattern so that results can be compared, and this pattern's own stop: no limit order, but an entry at the close of the first bar that reaches the 0.786 zone, a stop at X and a target at twice the risk. The 0.618 retracement of CD is measured separately.

Cypher vs. other harmonic patterns

The closest cousin is the Shark pattern, which Scott Carney described: there too, C goes beyond A, but D completes deeper, at 0.886 to 1.13 of the move to C, so it can end beyond X. Here D stays inside the range, which gives a natural stop at X. Our XABCD guide covers the common frame of these patterns.

Is the cypher pattern reliable?

Detecting it without judgment requires choices, and we set ours from chart reviews, never from results. Turning points are swings of 2, 4 or 8 times the average true range, and X must be a real turning point: over a stretch as long as XA before it, price never went more than 10% of XA beyond X. B must retrace 0.382 to 0.618 of XA, and the move from X to C must measure 1.272 to 1.414 times XA, the main range (not the 1.13 of looser versions). A ratio published as a single value is accepted within 5% of it, so the reversal zone is the 0.786 retracement of XC, from 0.747 to 0.825. The signal is the first bar that trades into the zone without trading below X. Each choice changes the result, and trying many versions until one looks good would produce a number that means nothing, which is why we publish one rule and keep to it.

On 2,085 closed trades on bullish setups on daily charts, all markets together, the 2:1 trade reached its target 34.1% of the time, against 34.0% for the same trade on random dates. On 1,815 bearish trades, it was 26.2% against 27.2%. Neither gap is measurable. The 0.618 retracement of CD was reached before the stop, within 100 bars, in 39.6% of bullish daily setups and 30.3% of bearish ones.

A claim that this setup has the highest win rate of any harmonic pattern means little unless it says how the patterns were identified, on which data, and how the result compares with chance.

What the bench measured on the cypher

Every occurrence our rule finds on full price history, in crypto, forex, US stocks, ETFs, indices and commodities, compared with the same trade placed on random dates on the same assets.

Read each row in pairs: the pattern against the same trade on random dates. On daily charts, all markets together, the cypher showed no clear edge in either direction. Two daily lines stand out in the All measurements table of the statistics section. Bullish setups on daily crypto charts are rated No clear edge on the 10-bar move (57.0% higher 10 bars later, against 44.9% for random bars), on only 135 setups, and their 2:1 trade did not do significantly better than random dates (30.3% against 32.7%, on 132 trades). Bearish setups on daily index charts are rated No clear edge on the 2:1 trade: the target was hit in 14.9% of 47 trades, against 23.9% on random dates. On hourly charts, bullish setups did about as well as random dates on the 2:1 trade, with an average result of +0.01 R against +0.01 R per trade (rated No clear edge). Bearish setups on 4-hour crypto charts reached the target 24.5% of the time against 28.7% on random dates (rated No clear edge): their average result per trade fell short of random dates, but not by a statistically significant margin; all markets together, 25.1% against 29.3% (rated No clear edge). On hourly charts, all markets together, the bearish 2:1 trade did slightly worse than the same trade on random dates: 25.2% of 3,883 trades reached the target, against 28.2%, for −0.07 R against −0.01 R per trade (rated No clear edge), a gap within the margin of error. On hourly crypto alone, 24.2% against 28.0%, the shortfall passes a simple test but not our correction for multiple testing (rated Weak, below chance). On weekly charts, the bearish trade fell short of random dates too: 17.9% against 20.7% on 229 trades, −0.44 R against −0.32 R (rated No clear edge), a gap within the margin of error. The direction tells another story. On 4-hour crypto charts, 54.4% of bearish setups were lower 10 bars later, against 51.9% of random bars, an average excess of +0.86% (95% interval +0.26% to +1.58%) that held in both halves of the history and passes a simple test, but not our correction for multiple testing: the 10-bar move is rated Promising, not a proven edge. The 2:1 trade, with its stop at X, did not capture it, so this is a fact about direction, not a profitable setup. The method is published in our methodology.

Advanced strategies for trading harmonic patterns

• Trend filter: look at the higher timeframe first, and take a long setup only when the higher timeframe is also in an uptrend, such as above a rising 200-day moving average. On daily charts, our bench splits the bullish cypher by the 200-day average: the trade hit its target in 36.1% of the 710 cases above it, against 33.3% of the 1,372 cases below it, for a similar average result per trade, +0.12 R above and +0.14 R below (a descriptive split, not corrected for multiple testing).
• Divergence at D: in a long setup, price makes a lower low at D than at B while the RSI indicator makes a higher low, which fits the idea of a fading decline. Momentum indicators are possible filters; we have not tested them.
• Confluence: harmonic traders favor a D that sits on prior support and resistance, based on several lines that meet; as said above, we have not tested these confluences.

Advantages and limits of the cypher pattern

• Advantage: the whole plan (entry price, stop at X, targets on CD) is known before price reaches D.
• Advantage: only three Fibonacci ratios to check, fewer than the Gartley or the Crab.
• Limit: the swing high and low that define X and C are chosen by eye, so two traders can draw different patterns.
• Limit: a limit order at D buys a falling price, or sells a rising one, before any sign of a turn.
• Limit: we know of no independent, published test showing that these ratios beat chance, and our own test found no proven edge on the 2:1 trade on any market or timeframe; the one promising result, the 10-bar move of bearish setups on 4-hour charts, driven by crypto, does not survive our correction for multiple testing and did not turn into a profitable trade.

Common mistakes to avoid when using harmonic patterns

• Forcing the measures: calling any structure with C above A a cypher pattern. If B or D is off, it is one of the other patterns, with another exit.
• Measuring D on the wrong wave: D is 0.786 of the move from X to C, not of the first wave.
• Ignoring the higher timeframe: a long setup against a weekly chart in a downtrend, or under major support and resistance, trades against the main trend in the classical reading; we have not measured that filter on the cypher.
• Moving the stop: once price passes X, the structure is invalid.
• Acting early: a setup is not complete until price reaches D.
• Remembering only the winners: keep a record of every setup you would have traded.

TradingView scripts and scanners for the cypher pattern

• XABCD drawing tool: TradingView includes one that shows the Fibonacci ratios as you click.
• Free script library: the TradingView public library has free scripts that find this formation automatically. A trader should read each script's description: proportions and tolerances differ, so two scripts can mark different patterns on the same chart. They are written in Pine Script, TradingView's script language, so you can read the exact tolerance each script uses. Before trusting any script, compare it with your own drawing on a few past patterns.
• Harmonic scanners: paid services use their own detection methods, scan many assets and send alerts when a pattern completes. Some open a free trial: use it to check the alerts against your own drawing. Test them on past patterns before paying.

Questions about the cypher pattern

Summary

• B at 0.382 to 0.618 of XA, C beyond A at 1.272 to 1.414 of X to A, D at 0.786 of the move from X to C.
• Act at D, stop beyond X, targets at the 0.382 and 0.618 retracements of CD.
• C beyond A separates it from the Gartley and the Bat; a deeper D, at 0.886 to 1.13 of the move to C, suggests the Shark.
• Tested on our bench with one published rule: no measurable difference from chance on daily charts, all markets together, in either direction. The closest call is the 10-bar move of bearish setups on 4-hour charts (Promising, not confirmed by our correction for multiple testing), which the 2:1 trade did not capture.

This guide is general information about technical analysis and financial markets, not financial or investment advice. Past behavior does not guarantee future results. Trading carries a risk of loss: never trade money you cannot afford to lose.

About the author and the data. Written by Amaury, founder of PatternsWizard, who is passionate about finance, quantitative trading and data analysis. He built the PatternsWizard test bench, which detects each setup with published rules on full market history: crypto, forex, US stocks, ETFs, indices and commodities. Trades and win rates are compared with random bars on the same assets, excess returns with the rest of the market, with error margins and a correction for multiple testing, and the whole pipeline is checked on random-walk prices, where nothing can be predicted. The cypher rule (swings of 2, 4 or 8 times the average true range, ratios within 5%) was set from chart reviews, never tuned on results. Statistics on this page were generated on November 5, 2026. The full methodology explains how it works.