The crab pattern is considered one of the most precise harmonic patterns, offering excellent risk-reward ratios at extreme price extensions. Discovered by Scott Carney in 2000, this pattern uses specific Fibonacci ratios to identify high-probability reversal zones. In this comprehensive guide, you will learn the exact rules for identifying and trading the crab pattern.
What is the Crab Pattern?
The crab pattern is a five-point harmonic pattern (X, A, B, C, D) that identifies potential reversal zones at the 1.618 Fibonacci extension of the XA leg. What makes the crab unique is that it extends beyond the starting point X, creating a deep reversal zone where price often turns sharply.
Key defining ratio: The crab pattern is defined by point D reaching the 1.618 extension of XA. This is the primary ratio that distinguishes the crab from other harmonic patterns like the butterfly or Gartley.
Crab Pattern Fibonacci Ratios
These are the precise Fibonacci ratios that define a valid crab pattern:
- AB: 0.382 to 0.618 retracement of XA
- BC: 0.382 to 0.886 retracement of AB
- CD: 2.24 to 3.618 extension of BC
- XD: 1.618 extension of XA (the defining ratio)
Bullish vs Bearish Crab Patterns
Bullish Crab Pattern
The bullish crab forms at the end of a downtrend and signals a potential reversal to the upside:
- Point X is the high, A is the low after the first decline
- Price bounces to B, then drops to C
- Final drop to D reaches 1.618 extension of XA below X
- At point D, look for buying opportunities
Bullish Crab Example
Stock starts at X ($100), drops to A ($80) - a $20 move. It bounces to B ($88) - 0.4 retracement of XA. It drops to C ($82) - 0.75 retracement of AB. Finally, it extends down to D ($67.64) - the 1.618 extension of XA ($100 - $32.36). At D, traders look for reversal signals to go long.
Bearish Crab Pattern
The bearish crab forms at the end of an uptrend and signals a potential reversal to the downside:
- Point X is the low, A is the high after the first rally
- Price pulls back to B, then rallies to C
- Final push to D reaches 1.618 extension of XA above X
- At point D, look for selling opportunities
Bearish Crab Example
Stock starts at X ($50), rallies to A ($70) - a $20 move. It pulls back to B ($62) - 0.4 retracement of XA. It rallies to C ($67) - 0.625 retracement of AB. Finally, it extends up to D ($82.36) - the 1.618 extension of XA ($50 + $32.36). At D, traders look for reversal signals to go short.
How to Identify the Crab Pattern
Follow these steps to identify a valid crab pattern:
- Find the XA leg: Identify a significant price move
- Measure AB: Should retrace 0.382 to 0.618 of XA
- Check BC: Should retrace 0.382 to 0.886 of AB
- Project D: Calculate where the 1.618 XA extension falls
- Verify CD: Should be 2.24 to 3.618 extension of BC
Pattern validation: All Fibonacci ratios must align for a valid crab pattern. If point D does not reach the 1.618 XA extension, it may be a different harmonic pattern like a butterfly or bat.
Trading the Crab Pattern
Entry Strategy
- Wait for price to reach the potential reversal zone (PRZ) at point D
- Look for confirming candlestick patterns (doji, engulfing, hammer)
- Enter when you see price rejection at the 1.618 level
- Consider scaling into the position
Stop Loss Placement
- Conservative: Place stop beyond the 1.618 XA extension
- Standard: Use the 2.0 XA extension as your maximum stop
- If price moves past 2.0 XA, the pattern has failed
Profit Targets
- Target 1: 0.382 retracement of CD leg
- Target 2: 0.618 retracement of CD leg
- Target 3: Point C level
- Target 4: Point A level for aggressive targets
Deep Crab Pattern Variation
The deep crab is a variation where the B point retraces deeper:
- AB retraces 0.886 of XA (instead of 0.382-0.618)
- All other ratios remain similar
- Point D still completes at 1.618 XA extension
- Often provides even better reversal opportunities
Risk Management Tips
- Use the PRZ: The potential reversal zone gives you a defined risk area
- Position sizing: Calculate position size based on stop distance
- Partial profits: Take profits at each target level
- Trailing stops: Move stop to breakeven after Target 1 is hit
Common Mistakes to Avoid
- Wrong ratios: Forcing patterns that do not fit the exact Fibonacci rules
- No confirmation: Entering without waiting for price action signals
- Ignoring context: Not considering the broader market trend
- Tight stops: Crab patterns need room to breathe at the PRZ
Confluence Factors
Increase your success rate by looking for confluence:
- Support or resistance at the PRZ
- Round number levels
- Previous swing highs or lows
- Moving average alignment
- RSI oversold or overbought conditions
Track Your Harmonic Pattern Trades
Pro Trader Dashboard helps you log and analyze your harmonic pattern trades. Track your crab pattern success rate and see which setups work best for you.
Summary
The crab pattern is a powerful harmonic formation that identifies reversal zones at the 1.618 Fibonacci extension of XA. Its precise ratios create well-defined entry points with excellent risk-reward potential. Remember to validate all Fibonacci relationships, wait for price action confirmation at point D, and manage your risk with proper stop losses. With practice, the crab pattern can become a reliable weapon in your trading arsenal.
Want to learn more harmonic patterns? Check out our ABCD pattern guide or explore continuation patterns.