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What is a PRZ? Harmonic Trading Lesson

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Harmonic Trading – How to recognize and build a PRZ

PRZ (Potential Reversal Zone) is the price zone in which harmonic patterns traders, are looking for reversal signals (fatigue\exhaustion of trends).

The PRZ is actually “The Money Zone” – This is the execution zone that will either turn the trade plan and the pattern to a profitable one or to a failed one.

I’ve prepared a Youtube video (see below) in which I demonstrate how to recognize a PRZ and how to draw it on your charts. I’m using the basic AB=CD pattern for the use of this demonstration and later in the second half of the video I’m showing a real trading scenario that I currently have for $GPRO so you’ll be able to see both theory and how the PRZ is being built on real stock chart:

The basic principle of an AB=CD pattern’s PRZ are:

  1. Equal distant legs (AB leg equal CD leg) – The PRZ is found at the end of the CD move.
  2. Fibonacci extension levels create Fib confluence zone

Combination of the two price zones creates a PRZ which is wide enough to let the price trade inside and react to the potential change in leading forces (bulls vs. bears).

 


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