Before trying and trading the pattern, confirm from this checklist that the pattern is real. It should include these vital elements:
An pattern or an extension of this pattern
An 88.6 percent of the X-A leg
A 161.8 to 261.8 percent of the B-C leg
Next will be to look at how traders can trade using the . We will make use of the pattern as an example. For a pattern, simply do the opposite for your orders.
The next thing that needs to be satisfied for an authentic structure is a minimum 0.382 of the XA leg and it can go as deep as 0.50 of the XA leg, but it cannot break below the 0.618. This will form the B leg of the pattern.
The next thing traders should do is to look for a retracement of the AB leg up to at least 38.2 percent Fibonacci ratios, but it cannot exceed the 88.6 percent, and this will form the third point C of the pattern strategy.
The last thing to do is to establish is the D point, and to get to the D point, find the 0.886 Fibonacci ratios of the impulsive XA leg, which will lead to a deep CD leg, and finally, it will complete the entire structure of the pattern.
The market strategy of the pattern has been tested across various classes of assets ( , currencies, stocks, and cryptocurrencies). It is recommended that traders should take the time and back-test the bat strategy before using this for trading.
Step 1: Drawing the pattern
Begin by clicking on the indicator that is found on the right-hand side toolbar
Identify the beginning point X, which can be any swing high or low point on the chart
After identifying the first swing high/low point, simply follow the market swing wave movements
You should get 4 points or 4 swings high/low points that join and form the strategy
Step 2: Trading the pattern
The 88.6 percent Fibonacci ratio provides traders a more reliable risk/reward ratio which is why the market strategy of the is such a very popular as a market strategy. The best entry point is the 88.6 percent which is a very accurate market turning point.
Step 3: Placing a stop-loss
Usually, traders should place their protective stop-loss lower than the point X of a . That is the only logical location to hide the stop-loss because any break below will automatically invalidate the pattern.
Step 4: Take-profit margin
There can be several ways to manage your trades, but the best target for this pattern should be to use a multiple take profit formula. For this pattern strategy, take the first partial profit once you hit wave-C level and the remaining half once we break above wave-A.
By doing this you will accomplish two things:
first, you’ll ensure that you accumulate profits,
and secondly if the markets reverse, you ensure you’re stopped at BE and don’t lose any money.
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