Bat pattern was developed by Scot Carney and was named so because it resembles the bat wings. This pattern is liked by many for its accuracy, good risk/reward ratio and relatively frequent appearance on charts. There are 2 versions of the pattern bullish (looks like letter ‘M’) and bearish (looks like letter ‘W’). Below are the schematic pictures of the Bullish and Bearish Bat patterns:
- AB movement should be 0.382 or 0.500 retracement of XA.
- BC movement should be 0.382 or 0.886 retracement of an AB.
- If the retracement BC 0.382, then the CD must move 1.618 of BC. Consequently, if BC is 0.886, then the CD should be 2,618 BC.
- CD should be 0.886 retracement of XA
Bat Pattern is a trend continuation pattern, it is traded in direction of the trend when the price is approaching point D. The stop is placed few ticks below/above the farthest possible D level. The safe target lies within 38.2-61.8% of AD move. Many patterns can do much better than that, but the conservative targets must be used to lock in profit and possibly unloading part of the position. Entries might be done with a limit order or on price reversal away from D. All entries must be tested for risk/reward ratio. Entries with low risk/reward has to be taken cautiously or discarded altogether.
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