We all know that harmonic patterns are used by many traders due to its high reliable trading signal. Bat harmonic is one of the most traded harmonic chart pattern used in the forex industry by many trader. “The Bat Harmonic pattern is made by some little modification Gartley Pattern.”
Let’s look at an example of Bat Harmonic Pattern
Figure: Bullish and bearish bat harmonic pattern.
The bat harmonic pattern is preferred by many traders since the dynamic forex market behave much more accurately with this pattern. Many traders’ memories these two pattern with the two alphabet M and W. “There are lots of amazing harmonic indicators which will draw these pattern for you in the chart for free.”
Formation of the pattern
The first move which XA can be formed at any area of the chart regardless of the trend. The second move AB is the 38.2%or50% retracement of the first wave XA. The third wave in this pattern which is AC is the 38.2 % retracement of the wave AB. The final move is the BC which the traders observe very carefully. Once the AC retraces168.2% of the third wave then the pattern is said to be complete. Another important parameter while trading these pattern is the length of AD. The length of AD must be 88.6% of Ac in order to form a valid pattern for trading.
Trading the pattern is very easy. Trader enters long at point for bullish Bat pattern and go for short at the bearish bat pattern. Some trader use price action confirmation and previous support and resistance level for stronger signal.
The stop loss is generally placed just below the point D or price action confirmation candlestick. Once they enter the trade successfully they set their TP to next significant support or resistance level depending on the trade. Though the reliability of Bat harmonic pattern is very high traders must use proper money management in order to save themselves from unusual circumstances.