Practical Forex Trading Strategies With Fibonacci Bat Patterns
You want a reversal signal with maximum accuracy and minimal risk? One of the best alternatives is the trading strategy with the Fib Bat pattern, try and prove it yourself!
In the previous article, we have discussed the Fibonacci ABCD and Gartley’s patterns. This time, no less interesting, another Fibonacci pattern helps us to detect reversal. The Fibonacci Bat pattern at a glance looks similar to Gartley’s Fibonacci pattern, but there is actually a difference between the two. In this article, we will explore these differences and in what situations we can apply the Fibonacci Bat pattern optimally.
Understanding the Basic Trading Strategy With Fibonacci Pat Pattern
The term “Fibonacci Bat pattern” was popularized by technical analysts because the pull of the lines is similar to the profile of a bat. The two “wings” have an almost equal length because the Reserve key’s key is 88.6% the last leg length of the initial leg.
Like most other Fibonacci patterns, the Fibonacci Bat pattern has a bullish and bearish version.
The Fibonacci pattern generally indicates a strong trend is experiencing a retracement for a while, then resumes its initial trend. The last leg of the Bat Fibonacci pattern provides a reversal signal to the trader to open positions with relatively little risk.
Procedure for Withdrawal of Fibonacci Bat Pattern Lines
Each foot (pull of the line) is drawn on certain criteria based on Fibonacci Retracement, as follows:
- XA feet are the longest first legs and feet. Drag the line from the swing low to swing high on the chart.
- The AB leg is a retracement of 38.2% to 50% of the XA foot.
- The BC leg is a 38.2% to 88.6% retracement of the legs AB. The high price at the foot of BC should not exceed AB’s high foot price.
- The CD foot is the last and most important leg in the Fib Bat pattern. Ideally, the CD leg is a retracement of 88.6% of the XA foot and the 161.8% extension -261.8% of the BC foot. At the foot of the CD, you can open a position.
The most striking difference of the Fibonacci Bat pattern with Gartley is at the length of the last leg of the foot. On the Fibonacci Bat pattern, the risk of the opening is smaller than Gartley because of the retracement of the 88.6% CD foot of XA. We’re at that level the price is likely to have touched the saturation point and is ready to bounce (reversal) from the support or resistance point.
Practical Application of Trading Strategy With Fibonacci Pat Pattern
The Fibonacci Pattern Bat will provide a signal with good accuracy if the pattern of the legs has followed the procedure correctly. Fibonacci patterns can be used at any time frame, but generally, to avoid noise and improve accuracy it is recommended to use the H4 time frame and above
First, you can immediately determine the entry-level by preparing to place a buy limit on point D when the Fib Bat pattern is complete (BC 88.6% of XA).
After that, put a stop loss at the price level of the X point or a few pips below it. As for TP, you can place it at the 61.8% retracement level of the swing high A-line to the low swing point D. If you want to be more conservative you may consider changing the TP position below it, or if you dare to risk raising the TP to the point 78.6 % retracement.
Please note, in the example above required holding position for 11 days to reach take profit of 200pips. You may need additional trading cost calculations if the swap charge (rollover interest) on the traded pair is high enough.