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 first thing to look for when looking for this pattern is the impulsive leg or the XA leg. We are trying to identify a strong move up or down depending if we either have a or a pattern.
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.
It is recommended that traders should enter as soon as they touch the 88.6 percent figure. Oftentimes the strategy doesn’t go much above this level.
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.