Bat

[John Aaby]

Can you tell me specifics of the bat pattern? It looks quite complicated for the beginners, hence I would like to learn more about the pattern and see if I can start using it more frequently.

[Elise Cubb]

Hi John, thanks for trusting us with our assessment. 

A Bat pattern is a harmonic pattern that looks very similar to the Gartley pattern. Both are continuation patterns as they help the overall trend to extend higher. As with every other harmonic pattern, the Bat has a structure that is based on Fibonacci numbers.

This structure should follow the following rules:

XA - Any bullish or bearish move classifies as the XA leg.

AB - The retracement of the initial XA move should end between 38.2% and 50%, signalling a strong initial trend. 

BC - The point BC takes place in the same direction as the overall XA move. It is supposed to finish at either 38.2% or 88.6% of the AB move.

CD - The point D comes at either 161.8% extension of the BC leg if there was a 38.2% retracement in BC, or 261.8% extension of BC if the prior move retraced to 88.6%. 

XD - Once the point D is set, it should account for the 88.6% retracement of the initial XA leg. 

The point D is where we should place our buy/sell signal. Stop-loss order is supposed to take place below/above the point X, while take profit orders are best to be staggered, from the point B, then D and finally X. Ultimately, the Bat pattern almost always offers a very attractive R:R (risk and reward) ratio that makes the entire trade very appealing.