1.4 The Bat Pattern
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.
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:
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 figure above for a better understanding of the process:
First, click on the harmonic pattern indicator which can be located on the right-hand side toolbar of the TradingView platform.
Identify on the chart the starting point X, which can be 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.
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 go much beyond this level.
Step #3: Place the Protective Stop Loss below Wave X
Normally you want to place your protective stop loss below the point X of a harmonic bat pattern. That’s the logical place to hide your stop loss because any break below will automatically invalidate the Bat pattern.
Step #4: How to Trade the Bat Pattern – Take TP1 at Wave C and TP2 at Wave A
There can be many ways to manage your trades, but the optimal target for this pattern should be to implement a multiple take profit strategy. For the Harmonic Bat pattern strategy, we’re going to take the first partial profit once we hit wave-C level and the remaining half once we break above wave-A
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.
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
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 figure above for a better understanding of the process:
First, click on the harmonic pattern indicator which can be located on the right-hand side toolbar of the TradingView platform.
Identify on the chart the starting point X, which can be 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.
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 go much beyond this level.
Step #3: Place the Protective Stop Loss below Wave X
Normally you want to place your protective stop loss below the point X of a harmonic bat pattern. That’s the logical place to hide your stop loss because any break below will automatically invalidate the Bat pattern.
Step #4: How to Trade the Bat Pattern – Take TP1 at Wave C and TP2 at Wave A
There can be many ways to manage your trades, but the optimal target for this pattern should be to implement a multiple take profit strategy. For the Harmonic Bat pattern strategy, we’re going to take the first partial profit once we hit wave-C level and the remaining half once we break above wave-A
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