When a price trend changes its direction and then continues, it forms a bat harmonic pattern. Therefore, traders use it as an entry point because it points to the continuation of the trend. It’s similar to a Gartley. However, its Fibonacci ratio retracement from X to A is different.
What Is A Bat Pattern?
It’s one of the harmonic chart patterns, but not as old as the Gartley pattern, as the bat pattern’s discovery dates back to 2001. This five-point pattern has Fibonacci ratios to consider for each bat pattern trading point. Traders say it’s the most accurate of the harmonic chart patterns.
How To Trade This Type of Harmonic Pattern
Since it has many similarities with other harmonic chart patterns, draw it. That’ll show your entry and exit point for bat pattern stocks. On top of that, set your stop loss level at point X. You can also set a take profit at A to minimize risk.
How To Identify A Bat Pattern?
A bat chart pattern shows you where the next trend reversal will occur. It resembles Gartley, butterfly, crab, and shark patterns. Therefore, learn these patterns, as you may confuse them unless you know their Fibonacci ratios.
The price on a bat pattern swings four times between the five points. Hence, you can trace the pattern from X to D (X, A, B, C, D). When there’s a perfect form, D is the reversal point. Its other name is the Potential Reversal Zone (PRZ), meaning the price trend can change at D.
Example Of A Bat Pattern
Point A to B of a bat harmonic pattern retraces between 38.2% and 50% of the XA move. It keeps rising, reaching 161.8% to 224% of the XA move from B to C. You also notice a retracement of up to 88.6% from X to D.
A chart can have a bearish or bullish bat harmonic pattern. The place it appears on the chart determines what it is. Thus, it can be at the bottom of an up or downtrend. If it’s bearish, it forms a W. On the other hand, a bullish bat pattern shows an M.
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