Bat Pattern is a type of Harmonic Forex trading Pattern that is an extended form of the Gartley Pattern. Bat Pattern is the combined set of present Fibonacci Ratios that represents four movements and reversal of high probability. Scott Caney is said to have discovered this pattern in the year 2001. This pattern is so named because the shape of this pattern on the chart looks like a bat. This pattern incorporates the retracement of 0.886. Same as the Gartley Pattern, this pattern is also a Retracement Pattern. This pattern does the retest of Support level if the pattern is a Bullish Bat Pattern and also retests the Resistance level if the pattern is a Bearish Bat Pattern.
Importance of the Bat Pattern in Forex trading
The successful Forex traders and investors consider this pattern important because of the high probability reversal signals given by this pattern. The traders and investors consider this pattern as a powerful pattern because using this pattern they can get straightforward entry price points and exit price points. The success of Bat Pattern is 89-95% and this is more than other Harmonic Patterns. One more reason why the traders and investors consider this pattern important is the suitability of it with any time frame such hourly, daily, weekly and monthly. This pattern is also suitable with any Forex Trading style such as intraday, swing or positional.
Structure of the Bat Pattern Chart
In this pattern, the first side is XA and the last side is CD as shown in the figure below for both the bearish and bullish Patterns.
Validity of the Pattern
To check the validity of the Pattern, the traders and investors should see that the D point do not exceed the X point because if it exceed the X point then in this case the Bat Pattern fails and turns to a Crab Pattern. An extended AB=CD Pattern where the CD side is 1.27 of the AB side. If AB and CD have same length in AB=CD then also the pattern is valid but is a minimum requirement condition for the pattern to hold validity.
Accuracy of the Pattern
This pattern holds high degree of accuracy and need stop loss smaller as compared to the other patterns. Little guesswork is required in this pattern because this pattern depend on fixed Fibonacci numbers. The CD side or the third side of the Pattern has Fibonacci Extension of 1.27 of the AB side.
How to trade in the Bat Pattern
It is advisable to the Traders and investors to place their stop loss above the 0.886 price retracement level of the side XA in this pattern. Traders can also place their stop loss above the point X in this pattern because above the point X, a strong Support level is present in the Bullish Pattern and a strong Resistance level is present in the Bearish Bat Pattern. For example, see a figure below in which XABCD represents the Pattern.
So the traders and investors knowing the importance, validity, accuracy and the way of trading in this pattern can earn huge profit.