The Bat Pattern, is a precise harmonic pattern discovered by Scott Carney in 2001
The pattern incorporates the 0.886XA retracement, as the defining element in the Potential Reversal Zone (PRZ).
The B point retracement must be less than a 0.618, preferably a 0.50 or 0.382 of the XA leg. The Bat utilizes a minimum 1.618BC projection.
In addition, the AB=CD pattern within the Bat pattern is extended and usually requires a 1.27 AB=CD calculation. It is an incredibly accurate pattern and requires a smaller stop loss than most patterns.
"It is an incredibly accurate pattern". What is the probability of the Bat if traded with a limit order, stop at X, tp at 1:2RR, defining swing lows and highs as 5-bar fractals and 13-bar fractals on EURUSD, 4H? How many patterns found during past 20 years? What is the math expectancy? What is the average win? What is the average loss?
I can only comment on my own experience back testing the bat pattern, where I did not use fractals to define swing lows/highs.
My results over 100 patterns, across multiple time frames from 15m upwards, came to a success rate of 62%.
I would add, having recently revised the works of Scott Carney (he discovered and/or defined most of the major patterns), that my results may be erroneous due in part to my previous basic knowledge of his works whilst back testing.
The accuracy is in relation to the size of the stop loss in comparison to the other major patterns, and not to the success rate, which I assume is what you are questioning.
Alexander_Nikitin
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@Tradesy1,
100 patterns is not enough for reliable statistical data. Only one pattern shifts the probability by 1% in this case. Reliable statistical data starts from 5000 per timeframe. I don't trust Scott M. Carney. His sample size is as low as yours. In his books he says that he analyzed a thousand of charts. Well, half of these charts don't have patterns at all (500 left). Half of remainder probably has gartley patterns (250 charts left). The rest probably has Bats. 250 patterns for all possible stocks and forex pairs? 1-2 patterns per a Stock?
Swing low extremes are always fractals as they have preceeding bars higher than the extreme and following bars higher than the extreme. Reverse for swing high extremes. According to Gartley, H.M ("Profits in the Stock Market", WA: Lambert-Gann, 1935 - this book is in Bibliography list of "Harmonic Trader", 1998 by Scott M. Carney) pattern identification should be based on minor trend reversal points. Edwards and Magee ("Technical analysis of Stock Trends", 1951) further explain that a minor reversal is a bar that sticks out of 7 bar period - three bars before the extreme and three bars past extreme. Connecting minor reversals we get minor trends. Minor trends is what we now call swings. Minor reversals is what we call swing highs/ swing lows. Moreover, in "Harmonic Trading, Vol 1", 2004 Scott M. Carney mentions Gann W.D. books in the Bibliography list ("How to Make Profits in Commodities". New York: New York Institute of Finance, 1942. and "Tunnel Thru the Air". Pomeroy, WA: Lambert-Gann Publishing, 1927.). Along with planetary moves, squares, angles, spirals, hexagons and other stuff, Gann puts the swing identification rules based on bars' HHHLs and LLLHs. Gann swing method is very similar to fractals: 1-bar, 2-bars and 3-bars reversals
Based on my backtest (> 100 000 000 patterns across different pairs and timeframes) price more often reverses at 0.75 than at 0.886. Anyways, both (0.75 and 0.886) show the accuracy less than 50% overall with stop at X and target 1:1RR. The only possible edge is to find specific pair-timeframes(like eurgbp, 30 and usdcad, 60) that are susceptible for these entries OR to find the best entry-stop-target combination for every possible pair-timeframe (the lattern is my way).
That's a considerable amount to unpack! I will attempt to formulate a reasonably concise response to everything. I did not note any new questions or arguments postulated against my previous response other than:-
1. 100 tests is not a large enough sample set to draw a reliable statistical conclusion.
2. You do not trust Scott Carney. (I assume the reason he uses his middle initial is that when searched for on google there are several other prominent figures named Scott Carney)
In the first instance I would agree in part that the larger a sample set is the more reliable the results.
I would however, as would most Statisticians, disagree with your statement that the arbitrary number of 5000 as a sample is the minimum for reliable results. In fact the minimum number for reliable statistical results as agreed by the majority of Statisticians is 100.
This section of our discourse leads me to ask which pattern(s) were tested in the >100 000 000 sample set?
Am I correct to assume one would be the Head & Shoulders pattern? as this is the most recognizable example of a Fractal in finance.
In the second instance I would pose that trust is subjective, to give an example I do not trust your use of "probably" in your detraction's of Scott Carney's works, where as others may take your opinions as iron clad.
GoldenEngine
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This is my Point of View too
Cryptsyxalt
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@GoldenWolFCharts, I welcome and will respond to all relevant comments to my published ideas.
UnknownUnicorn820920
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How can it be precise when the starting point for drawing the pattern is "subjectively" chosen from a random point on the left side of the chart? Teach it to a room of students and they will all pick random starting points to draw the pattern. No two people will start drawing the pattern the same way. Totally subjective and worthless.
Cryptsyxalt
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@IchimokuKisai, Good question! Harmonic patterns generally occur during periods of consolidation.
The Bat pattern is considered for the most part as a continuation pattern and as such, using the bullish example published, you would take the swing low preceding the most recent high as point X.
The precise nature of the pattern refers to the structure points and their relative fib ratios.
Check the link to related ideas to see a working example I am currently trading.