The Powerful Butterfly Reversal Pattern Update

Butterfly Pattern
Webcast starts at 8:30 EST
Leslie Jouflas
Founder of
www.TradingLiveOnline.com
Presents The Butterfly Pattern

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•THE RISK OF LOSS IN TRADING COMMODITIES CAN BE SUBSTANTIAL. YOU SHOULD
THEREFORE CAREFULLY CONSIDER WHETHER SUCH TRADING IS SUITABLE FOR YOU
IN LIGHT OF YOUR FINANCIAL CONDITION. IN CONSIDERING WHETHER TO TRADE OR
TO AUTHORIZE SOMEONE ELSE TO TRADE FOR YOU, YOU SHOULD BE AWARE OF THE
FOLLOWING:
(1) IF YOU PURCHASE A COMMODITY OPTION, YOU MAY SUSTAIN A TOTAL LOSS OF
THE PREMIUM AND OF ALL TRANSACTION COSTS.
(2) IF YOU PURCHASE OR SELL A COMMODITY FUTURE OR SELL A COMMODITY

OPTION, YOU MAY SUSTAIN A TOTAL LOSS OF THE INITIAL MARGIN FUNDS AND ANY
ADDITIONAL FUNDS THAT YOU DEPOSIT WITH YOUR BROKER TO ESTABLISH OR
MAINTAIN YOUR POSITION. IF THE MARKET MOVES AGAINST YOUR POSITION, YOU
MAY BE CALLED UPON BY YOUR BROKER TO DEPOSIT A SUBSTANTIAL AMOUNT OF
ADDITIONAL MARGIN FUNDS, ON SHORT NOTICE, IN ORDER TO MAINTAIN YOUR
POSITION. IF YOU DO NOT PROVIDE THE REQUIRED FUNDS WITHIN THE PRESCRIBED
TIME, YOUR POSITION MAY BE LIQUIDATED AT A LOSS, AND YOU WILL BE LIABLE FOR
ANY RESULTING DEFICIT IN YOUR ACCOUNT.
(3) UNDER CERTAIN MARKET CONDITIONS, YOU MAY FIND IT DIFFICULT OR

IMPOSSIBLE TO LIQUIDATE A POSITION. THIS CAN OCCUR, FOR EXAMPLE, WHEN THE
MARKET MAKES A "LIMIT MOVE."
(4) THE PLACEMENT OF CONTINGENT ORDERS BY YOU OR YOUR TRADING ADVISOR,

SUCH AS A "STOP-LOSS" OR "STOP-LIMIT" ORDER, WILL NOT NECESSARILY LIMIT YOUR
LOSSES TO THE INTENDED AMOUNTS, SINCE MARKET CONDITIONS MAY MAKE IT
IMPOSSIBLE TO EXECUTE SUCH ORDERS.
(5) A "SPREAD" POSITION MAY NOT BE LESS RISKY THAN A SIMPLE "LONG" OR "SHORT"
POSITION.
(6) THE HIGH DEGREE OF LEVERAGE THAT IS OFTEN OBTAINABLE IN COMMODITY

TRADING CAN WORK AGAINST YOU AS WELL AS FOR YOU. THE USE OF LEVERAGE
CAN LEAD TO LARGE LOSSES AS WELL AS GAINS. IN SOME CASES, MANAGED
COMMODITY ACCOUNTS ARE SUBJECT TO SUBSTANTIAL CHARGES FOR
MANAGEMENT AND ADVISORY FEES. IT MAY BE NECESSARY FOR THOSE ACCOUNTS
THAT ARE SUBJECT TO THESE CHARGES TO MAKE SUBSTANTIAL TRADING PROFITS
TO AVOID DEPLETION OR EXHAUSTION OF THEIR ASSETS.
THIS BRIEF STATEMENT CANNOT DISCLOSE ALL THE RISKS AND OTHER SIGNIFICANT
ASPECTS OF THE COMMODITY MARKETS. YOU SHOULD THEREFORE CAREFULLY
STUDY COMMODITY TRADING BEFORE YOU TRADE.
Books By Leslie Jouflas
-“Excellent book on pattern recognition
technical trading – well written and thorough
with plenty of good illustrative charts.”
--Mark Douglas,
Douglas author, The Disciplined
Trader and Trading in the Zone
“Larry Pesavento and Leslie Jouflas, the

quintessential traders of chart patterns and the
techniques of past masters of technical trading,
have put together a compilation of their
studies. Their experience extends over forty
years. This book covers the essence of chart
patterns trading plus the mental preparation
necessary for successful trading. There is
something in this book for both the beginner
TRADE What You SEE and experienced trader, Highly
recommended.”
How to Profit from
Pattern Recognition - John Hill,
Hill President, Futures Truth Co.
Books By Leslie Jouflas
Essentials of Trading:
It’s Not WHAT You Think
It’s How You Think
What we will cover in the Butterfly Pattern
Presentation
 History of the Butterfly Pattern: where did it

come from?
 Butterfly Pattern Structure: how it forms
 Chart Examples
 Characteristics of the Butterfly Pattern
Butterfly Pattern
 The Butterfly pattern is an Extension Pattern
 First named “Butterfly” by Larry Pesavento
 Found in all markets and in all time frames
 Tend to occur at major tops and bottoms
 Reversal Pattern
 When this pattern fails – it usually fails big
History of the Butterfly Pattern
 The Butterfly pattern was “born” in 1992 when Larry Pesavento
was sitting with Bryce Gilmore watching a pattern form from a
program Bryce Gilmore developed called the Wave Trader.
 The Wave Trader Program calculated each swing and ratio
using the Fibonacci summation series.
 The program analyzed and labeled patterns from 1 to 10. The
highest level, ten, was the level when 10 swings and ratios
came together at the same time and price.
 Larry Pesavento was watching as a Wave 10 pattern formed. It
appeared in many colors and as two colorful right triangles. Larry
commented that it looked like a butterfly and the rest is history.
Butterfly Pattern Structure
 Should have symmetry
 The structure has 4 legs
 Must have an AB=CD leg in the extension
 The C - D leg extends beyond “X”
 The completion point is generally determined
by the extension of the X - A leg
This pattern takes some time to identify and

learn, but well worth the effort!
Butterfly Buy and Sell Patterns
Two Triangles
Butterfly Pattern
Basic Structure
Butterfly Buy outline

Butterfly Sell Outline
AB is a retracement of the XA leg

BC is a retracement of the AB leg
The final leg, C to D will extend
above (sell) or below (buy) the starting point of X
Fibonacci Retracements Used
.382
.50.
.618
.786
.886
1.27
extension
1.618
extension
Fibonacci Extensions Used for Pattern Completion
areas
Calculating the Extension
1.27 Ratio 1.618 Ratio
Butterfly Pattern Structure Tips
 Look for symmetry

 The final leg, or 4th leg, is “extended” beyond the previous swing high
or low which is labeled “X”. Final leg is the CD leg.
 The extension will usually be a 1.27 or 1.618, but you may see other
ratios.
 The BC leg will also be extended, but the completion point is usually
determined with the X – A leg and the AB=CD completion areas.
 The AB and BC legs of the pattern will usually be the .618 or .786
retracement.
 The pattern is valid if a .382 or .50 retracement of the AB leg or the BC
leg.
 The B retracement can not exceed X and the C retracement can not
exceed A.
 There may be other AB=CD patterns within the legs of the pattern
Comparison
Asymmetrical Symmetrical
Steep
angle
Structure of the Butterfly Pattern on a price
chart
Butterfly Pattern Structure
SP Emini Butterfly SP Emini Butterfly
Extended CD Leg
Extended Leg AB=CD in Extended leg
5 Items that Invalidate the Butterfly Pattern
1. No AB=CD Pattern
2. Extension move beyond the 1.618 of X to A. The 1.618 is

generally the maximum risk
3. B can not be below X in a buy pattern formation. B can not

be above X in a sell pattern formation
4. C can not be above A for a buy pattern or below A for a sell

pattern.
5. Failure of D to extend beyond X
Failed Butterfly Pattern
Only D
Extends beyond X
“B” Can not be below “X” – but you may still have a valid
AB=CD Pattern (Can you find the butterfly sell?)
x
B
Make sure you have a valid AB=CD Pattern
C Can not exceed A
B Can not exceed X
Series of Butterfly Patterns
2 Butterfly Patterns within an AB=CD
Euro 2 Butterfly Sells
Use Retracements
Butterfly Sell Pattern Butterfly Sell to retracement
Euro Butterfly Buy
AAPL Stock Butterfly Sell Pattern
Failed Butterfly Pattern
Multiple Indexes with Butterfly Sells
Example of the DOW, SP

500 Emini, NAZDAQ and
Sp Russell Indexes all
Emini
forming Butterfly patterns
simultaneously
March 2009 Butterfly Buy Pattern
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*Trading Live Online is pleased to introduce the new
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“I created the TLO Live Trades Series for traders as something I wish I
had found when I was learning trading!”
 Live trades recorded over several trading sessions. This package includes Butterfly pattern
setups with a special bonus recording of the 3 Drive pattern managed in a trend.
 Invaluable insights as the patterns are forming in real time. The TLO Live Trade recordings
answer all the questions traders come across in live markets to help them to make important
trading decisions.
 Trading tips and nuances are covered for entries and how to re-enter a trade, profit targets, stop
loss placement and trader psychology such as dealing with head chatter like taking profit targets
too soon.
 Valuable information for high probability trade setups by reading support and resistance areas,
using index divergences, tick charts and bar charts.
REFUND POLICY: Due to the educational nature of these educational materials, Trading Live Online, LLC is unable to offer any kind of refund on this product. We will
promptly repair any defective link
Special Price Offer
TLO Live Trades Package is $127 and Includes
Free 30 Day Guest Pass ($250.00 Value)
 Over 2 ½ hours of viewing live trades with trade management on the butterfly pattern;
entries, stop loss placement and profit targets
 Butterfly Pattern Quick Tips recording
 Butterfly Pattern with 3 Part Profit target exits
 Butterfly pattern at larger resistance area (combining time frames)
 Butterfly pattern in the Euro market
 Bonus – using tick charts vs. bar charts comparison with the AB=CD pattern
 Webinar recording of the "Powerful Butterfly Reversal Pattern
 Butterfly Power Point presentation including my notes to help you understand this trading
pattern
 Order Here http://www.tradingliveonline.com/butterfly-pattern
REFUND POLICY: Due to the educational nature of these educational materials, Trading Live Online, LLC is unable to offer any kind of refund on this product. We will
promptly repair any defective link
©Copyright 2011Trading Live Online, LLC All rights reserved. Trading Live Online, LLC

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Butterfly Pattern

Webcast starts at 8:30 EST

Presents The Butterfly Pattern

No information may be copied, transferred,

(2) IF YOU PURCHASE OR SELL A COMMODITY FUTURE OR SELL A COMMODITY

(3) UNDER CERTAIN MARKET CONDITIONS, YOU MAY FIND IT DIFFICULT OR

(4) THE PLACEMENT OF CONTINGENT ORDERS BY YOU OR YOUR TRADING ADVISOR,

(6) THE HIGH DEGREE OF LEVERAGE THAT IS OFTEN OBTAINABLE IN COMMODITY

“Larry Pesavento and Leslie Jouflas, the

 History of the Butterfly Pattern: where did it

 The Butterfly pattern is an Extension Pattern

 First named “Butterfly” by Larry Pesavento

 Found in all markets and in all time frames

 Tend to occur at major tops and bottoms

 When this pattern fails – it usually fails big

This pattern takes some time to identify and

Butterfly Buy outline

AB is a retracement of the XA leg

1.27 Ratio 1.618 Ratio

 Look for symmetry

SP Emini Butterfly SP Emini Butterfly

2. Extension move beyond the 1.618 of X to A. The 1.618 is

3. B can not be below X in a buy pattern formation. B can not

4. C can not be above A for a buy pattern or below A for a sell

5. Failure of D to extend beyond X

Butterfly Sell Pattern Butterfly Sell to retracement

Example of the DOW, SP

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