Trading the Cypher Pattern

This is a free trading lesson on how to trade the Cypher pattern including drawing Fibonacci retracements, entries, stops and targets.

So the Cypher pattern was discovered by a guy over at and quickly became a popular advanced pattern to trade. As with all advanced patterns in theory it should work well in any market be it Forex, Commodities or Stocks.

Like other patterns such as the Gartley and Bat patterns drawing the Cypher pattern requires the user to utilise Fibonacci retracements and extensions in order to predict the next move of the market. A pre-requisite therefore is that the user must be able to identify prominent swings (or zig zags) in the market.

  • First find the most recent swing high or swing low. This is the point where the market has not yet exceeded, but has since made a retracement from. This will be our starting point, also known as “X-A”, with “X” being the swing high/low and “A” the point at which the market then began to retrace.
  • We want to measure in percentage terms the retracement of this move; that is to say by how much has the market retraced from point “A” back toward the starting point “X”.
  • In order for us to consider this a Cypher pattern the retracement must be at least 0.382% but LESS THAN 0.618%. Price Action must NOT touch 0.618%.
  • If Price Action does indeed fall between these levels and then resumes its original direction this new point shall be called “B”. If one connects these three points a triangle is formed which can help in identifying patterns.
  • As Price Action continues we need to measure how far it goes. In order to be a Cypher pattern it must reach 1.272% of “X-A” but not exceed 1.414%. The termination of this move (hopefully between 1.272% and 1.414%) will be called “C”.
  • If Price Action then retraces again we need to measure this new leg. We take a Fibonacci measurement from “X” to “C”. We need Price Action to retrace 0.786% of the “X – C” move. If it does, it’s time to trade!
  • Enter a trade in the original direction of the pattern (the same direction as “X – A”) placing your stop loss just outside of “X”.
  • To set your targets, first draw a Fibonacci retracement from “C” to “D”. Target 1 is the 0.382% level and target 2 is the 0.618% level. Once Price Action reaches target 1 move your stop loss to break even for a risk-free trade.