Looking for this patterns to complete, as the Shark pattern already completed, got target 1 filled and target 2 waiting to be filled.
For the Bat and the Cypher, I look for possible targets at important structure levels, this gives me more confidence to move stops to BE one price reaches first structure/target.
Also, is good to know that between Bat's point D and Cypher's point D, there is a Resistance zone, so I hope it adds to our favor and enhance the odds for this patterns.
Hey Daniel, can I ask what your rules are for stop placement on a 60 and 120 chart please? If there is not structure to consider how far from X are your stops typically and what is your normal risk/reward on cyphers and bats? Thanks very much, I just followed you. Cheers Matt
Daniel.Dalo
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Hi Matt! Thanks, if I don't have a very clear structure level above X, I usually place my stops between 10 to 15 pips above X, however, there are time when my initial target fall in a risk reward like 1:1 or a bit less, so in those cases I usually put my stops above X where I can get at least 1:1 risk/reward from my first target. But as a general rule, I think the 10 pips above X is a good place because the X should be at least a minor structure level, so is just to cover some spread and the wicks in the candlesticks if it goes to the X point level.
My targets usually are the 38.2 and 61.8 retracement levels, but if there is a very defined structure level , I use that instead.
I hope it helped, thanks and best of luck for you Matt!
mattb
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Thanks very much Daniel. Do you automatically enter all cyphers/bats etc, or do you have other factors to determine if the pattern is viable and has a good possibility of success. eg structure. Im testing cyphers and bats currently and Im entering all when the pattern exists, Im thinking I may need additional filters though, what you think? Cheers
Daniel.Dalo
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For me, knowing that without any filters, the patterns themselves have more than 60% success rate, I would place a limit order as I identity a pattern. However, if you would like to improve that success rate or to feel more confident, I personally take into account these filters:
1) Structure - if there is a major structure zone at the completion point, that would enhance a lot the probabilities.
2) Ratios - is not the same having for example a Bat pattern that makes the B leg at 40% retracement from XA, than having a Bat pattern completing B leg exactly at 50% or 38.2% retracement. I would trust a lot more in a pattern that respects the ratios with precision because that means that price is respecting or reacting to the fibonacci levels, giving you more probabilities that it will complete D point at the 88.6% retracement (in the Bat pattern) and having a reversal right there.
3) RSI - If you get an Overbought or Oversold condition on the RSI when price reaches D point for completion, the probabilities of price reversing increase.
4) Divergence - you could use the RSI to look for divergence just before price reaches D point.
It's up to you if you wish to combine all of this as a big filter for placing an order on a pattern, but of course it would give you less trades.
Personally, I trade them mostly with a limit order when I think the pattern will complete, but sometimes I use this filters to avoid a trade that maybe doesn't end up too good. What you can also do is use this filters to determine if you can increase the lot size in the trade and trade the minimum lot size when you don't use them.
Good luck!
mattb
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Thanks for the detailed reply, appreciated. Cheers
redlord
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Following you right now, i like your trading style. Harmonic is THE WAY! heeh. Many tks for sharing :)
Daniel.Dalo
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Thank you very much redlord!! I absolutely agree, Harmonic is the way, I really like this method, is very clean, very accurate and has very specific stops and targets!