How to Trade the Bat Pattern -Harmonic bat layout plan
The Harmonic Bat pattern strategy will coach you on how you can trade the bat layout and begin earning profits with a brand new exciting method of technical investigation. The bat design marketplace plan a section of their Harmonic trading routines system of gambling.
Our team in Dfxindo is building the very comprehensive detail by detail guide to Harmonic trading plus we also highly advise you to start reading the debut to the routines here: Harmonic Pattern Trading Strategy- How Easy Step By Step Guide.
It’s crucial to learn the introductory article to the routines since this will offer you an improved comprehension of the way you can trade the bat layout.
The Bat pattern is much like this Cypher harmonic pattern . however, it follows different Fibonacci ratios. Some of the crucial tactics to differentiate a Bat arrangement in the Cypher pattern would be that the B point that, though it doesn’t go beyond the 50% Fibonacci retracement of the XA leg then it’s a Bat, otherwise it can turn into a Cypher structure.
The bat pattern market strategy is suitable for all time frames and for all markets, but we have to keep in mind that on lower time frames using the Bat pattern market strategy comes with its own challenges because the Bat pattern has the tendency to show up on less frequent on lower time frames. We also have training on how to profit from trading.
Before we dive deeper into the harmonic bat pattern strategy, let’s look at what indicators we need to successfully trade this strategy.
The Fibonacci retracement and ratios are at the core of harmonic trading. Thanks to the rapid advancement in the technical analysis field we can find some very useful indicators to actually help us plot the harmonic patterns and these Fibonacci ratios.
You can find the Harmonic Pattern Indicator on most popular Forex trading platforms (TradingView and MT4) in the indicator section.
Now, let’s move forward and see how to trade the bat pattern.
How to Trade the Bat Pattern
The bat pattern market strategy like any other harmonic pattern is a four-leg reversal pattern that follows specific Fibonacci ratios. A proper Bat pattern needs to fulfill the following three Fibonacci rules:
- AB= minimum 38.2% and maximum 50% Fibonacci retracement of XA leg;
- BC= minimum 38.2% and maximum 88.6% Fibonacci retracement of AB leg;
- CD= 88.6% Fibonacci retracement of XA leg or between 1.618% – 2.618 Fibonacci extension of AB leg;
The first thing to look for when identifying the Bat pattern (see figure below) is the impulsive leg or the XA leg. We’re looking for a strong move up or down depending if we either have a bullish Bat structure or a bearish Bat structure.
The next thing that needs to be satisfied for a valid Bat pattern structure is a minimum 0.382 Fibonacci retracement of the XA leg and it can go as deep as 0.50 Fibonacci retracement of the XA leg, but it can’t crack below the 0.618. This will produce the B leg of the Bat design.
The next thing that weplanning to search to get is really a retracement of the AB leg upward to 0.382 Fibonacci ratios, nonetheless it might ‘t go above the 0.886, and this will create our third point C of the harmonic Bat pattern strategy.
The last thing we want to establish is the D point and in order to get to the D point, all we do is to find the 0.886 Fibonacci ratios of the impulsive XA leg, which will result in a deep CD leg and finally it will complete the whole Bat pattern structure.
The Bat Pattern Market Strategy
The Bat Pattern Market Strategy has been tested across different asset classes (currencies, commodities, stocks, and cryptocurrencies). We recommend that you take the time and backtest the harmonic bat patterns strategy before attempting to use this advanced pattern in your trading strategy.
Step #1: How to Draw the Bat Pattern
I would walk you through this process step by step. All you need to do is to follow this simple guide and see the figure below for a better understanding of the process:
- First, click on the harmonic pattern indicator which is located on the right-hand side toolbar of the TradingView platform.
- Identify on the chart the starting point X, which is any swing high or low point on the chart.
- Once you’ve located your first swing high/low point you simply have to follow the market swing wave movements.
- You need to have 4 points or 4 swings high/low points that bind together and form the harmonic bat pattern strategy. Every swing leg must be validated and abide by the Bat pattern Forex Fibonacci ratios presented above.
Now, we’re going to lay down the bat pattern market strategy rules.
Step #2: How to Trade the Bat Pattern, but at the completion of wave D which should satisfy the CD= 88.6% Fibonacci retracement of XA leg
The 88.6% Fibonacci ratio gives you a better risk: reward ratio which is the reason why the bat pattern market strategy is such a popular trading strategy. The ultimate entry point is the 88.6% Fibonacci retracement which is a very precise market turning point.
We recommend entering as soon as we touch the 88.6% figure because often times and based on our backtesting results we have found out that the harmonic bat pattern strategy doesn’t move much beyond this degree.
In the preceding graph, we are able to see a bullish bat layout onto the USD/JPY 4-h graph, and it is an indication to purchase.
The next crucial thing we will need to set is the place you can set our protective stop loss.
Step #3: Place the Protective Stop Loss below Wave X
Normally you wish to position your protective stop loss below the tip X using a harmonic bat layout. This ‘s the sensible spot to cover up your own stoploss because some break below will automatically repaint the Bat design.
The next logical thing we will need to set to your Bat pattern market plan is really where to make gains.
Step #4: How to Trade the Bat Pattern – Take TP1 in Wave C and TP2 in Wave A
There might be a number of techniques to handle your trades, however, the best target with this pattern ought to be to employ a multiple simply take profit plan. As an Harmonic Bat blueprint plan we’re likely to have the very first partial profit as we struck wave-C flat and also the rest of the once we crack above wave-A.
Important Note: Move your SL to BE as Soon as You TP1!
This simply take profit way is basically profitable because we guarantee we mimicked a few of our rankings at the very first trouble area out of where the purchase price could turn and reverse against us.
By achieving so we reach 2 things: firstwe make certain we collect profits and second in case the markets undo we make certain we’re ceased at BE and overlook ‘t lose any money.
*Note: Above is an example of a BUY trade using the Bullish Bat pattern market strategy. Use the same rules for a SELL trade. In the figure below you can see an actual SELL trade example.
Take a look:
This is a perfect example that demonstrates how useful the harmonic bat pattern strategy is in implementing the multiple take profit approach.
The harmonic bat pattern strategy will bring a special dimension into your trading because we’re examining the price action geometry. The Bat pattern market strategy has a very high rate of success and it needs a relatively small stop loss than most of the other Harmonic patterns. You can also trade with the Gartley Pattern Strategy.
It is important to note that the effectiveness of the harmonic Bat pattern strategy comes from the deep retest of support and resistance levels which often times are quite sharp.One of the key features of the Bat pattern market strategy is the smooth reversal once the 88.6% Fibonacci retracement is reached.
If you’re not comfortable using a reversal trading strategy you can try our popular trend following strategy MACD Trend Following Strategy- Simple to learn Trading Strategy.
Please Leave a comment below if you have any questions about this strategy!