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Cypher Pattern Rules Explained to Beginners

Unlike many other patterns that generally require using along with other indicators to confirm signals, the cypher pattern is a stand-alone instrument that makes it possible to utilize a profitable Forex strategy. While being a part of the huge geometric pattern group, the cypher harmonic pattern may offer potentially the highest winning rate if compared to other patterns.


This is what makes it so special and popular with experienced traders. Discovered by Darren Oglesbee, it delivers an advanced formation that comes with Fibonacci measurements in every point of the pattern structure.

Forex Cypher Pattern Indicator Explained

Before we dive deep into details about how to spot the indicator and use it on a chart, we need to consider the main three principles that apply to the cypher harmonic pattern. They are as follows:

  • It refers to the type of reversal patterns.
  • It consists of 4 legs the same way as other types of XABCD patterns.
  • It strictly follows the Fibonacci ratio in every point of its structure.

The Use of The Cypher Pattern

While being an advanced harmonic instrument, the cypher pattern comes with an amazing reward-to-risk ratio and strike rates, bit only when traded correctly. The key benefit for beginners is that the pattern is quite easy to identify on a chart. It is generally composed of a 5-point pattern to highlight the price rise or falls. The trading concept says that one should wait for a reversal at the end of the trend and make the most of the breakout using pending orders.

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No matter where and when the pattern occurs (as well as what particular construction it may have), it will remind traders of a butterfly. The only downside here is that traders should not expect it to occur quite often. The pattern appears seldom, which makes it even more desirable considering the power of profit it can generate.

The same way as with other harmonic patterns, traders will need to follow specific rules when using the cypher pattern.

Crucial Cypher Pattern Rules to Follow

The following rules will help you easily identify the cypher harmonic pattern in a chart:

  1. Point B should never exceed 61.8% but is supposed to retrace the gap between 38.2% and 61.8% of XA.
  2. The A point must be placed above the extension leg C. When point C moves beyond 141.4%, it is considered invalid.
  3. Point CD is supposed to exceed 78.6% of the XC level.
  4. Point D is the place that the price needs to reach. It is supposed to get to the PRZ, which is a potential reversal zone.

As you can see, the pattern has fewer rules to follow if compared to other harmonic indicators. It makes it simpler for beginners to use under real-market conditions and generate significant profits. However, we recommend using it when the market seems steady and calm. The pattern shows less reliability within “stormy” conditions changing under the influence of specific news. The smaller the pattern, the weaker support, and resistance it provides.

How to read the Forex Cypher Pattern Indicator

Bullish and Bearish Patterns. With a low X and high C pattern, the instrument appears to be a bullish tool and vice versa. High X and low C make it a bearish indicator.

The ‘B’ Rule. B is not supposed to reach 78.6% of the X to C retracement. It also refers to the candlestick wicks. A few traders actually follow this rule, although it can be of great importance at some point.

Market Psychology. Despite the fact the market is moving all the time and keeps trending in a cypher pattern, it may still make significant, sharp, and rapid reversals during the day. The key point to consider here is that both cypher patterns high and low are following the uptrend and vice versa for the bearish interpretation. What’s more, it may occur inside the price channel that has already been formed.

This material does not contain and should not be construed as containing investment advice, investment recommendations, an offer of or solicitation for any transactions in financial instruments. Before making any investment decisions, you should seek advice from independent financial advisors to ensure you understand the risks.