Hey, traders. It’s Wednesday and we have another edition of “Thoughts about Bat pattern”. Today we’ll continue talking about XA leg. As you remember from previous parts, XA is the MOST IMPORTANT thing in pattern recognition. Last time we discussed X-point location. Today we’ll discuss other points. And also we’ll talk about my way of using Fibonacci retracement tool. Let’s go.
Last time I told you that there’s a special algorithm helping to recognize XA legs. I’m going to reveal the sequence of actions right now.
Step #1. Always keep in mind that most people make their decisions to buy or sell currency without ever seeing charts. All they know is price. In many cases they know some price range. See what I mean? You may argue about impulses and corrections but price moves one tick up because those “most people” have bought all the offers at one-tick-lower price.
Step #2. Look at the last market movements. The final point of this movement is B-point.
Step #3. Look along this movement to its initial point. It’s A-point.
By these manipulations we have established an A to B range.
Step #4. Look left and find a larger range in relation to which the AB range can be called corrective. This larger range MUST end at the same point the smaller range starts from. It’s A-point. This larger range should look like 2 or 1.5 times larger than AB range. The initial point of this larger move is POTENTIAL X-point. Note that potential X point MUST be some sort of structure point. See “Thoughts about Bat pattern. Some tips and secrets. Part III”
to find out what I call structure point.
Step #4. Grab your Fibonacci retracement tool. Stretch the tool from potential X-point to A-point. Look at your B-point. Does it touch 50%? If not, then move your potential X-point to a higher structure point (for bull patterns) or lower structure point (for bear patterns). Restretch the Fibonacci retracement tool from this new potential X-point to A-point. Is B-point Ok now? If B-point goes through 50% and touches 61,8% then move your potential X-point to a lower structure point (for bull bats) or to a higher structure point (for bear bats). Restretch the fibs. Is B OK now? Remember: B-point MUST at least touch 50% and never touch 61,8% If there’re no structure points that allow your B-point rest in 50-61,8% range then there won’t be any Bat patterns.
Step #5. If there are more than one structure point allowing B-point rest in 50%-61,8% range, then choose whatever makes XA larger.
Step #6. After you have found a proper X-point placement measure the XA move. How many pips it is? To find out what size of XA move was proven to be optimal see Part I.
Do backtestings to train your eyes. It’s all about practice. If you will practice long enough you will recognize proper XA simultaneously.
Last time I told you that there’s a special algorithm helping to recognize XA legs. I’m going to reveal the sequence of actions right now.
Step #1. Always keep in mind that most people make their decisions to buy or sell currency without ever seeing charts. All they know is price. In many cases they know some price range. See what I mean? You may argue about impulses and corrections but price moves one tick up because those “most people” have bought all the offers at one-tick-lower price.
Step #2. Look at the last market movements. The final point of this movement is B-point.
Step #3. Look along this movement to its initial point. It’s A-point.
By these manipulations we have established an A to B range.
Step #4. Look left and find a larger range in relation to which the AB range can be called corrective. This larger range MUST end at the same point the smaller range starts from. It’s A-point. This larger range should look like 2 or 1.5 times larger than AB range. The initial point of this larger move is POTENTIAL X-point. Note that potential X point MUST be some sort of structure point. See “Thoughts about Bat pattern. Some tips and secrets. Part III”
Step #4. Grab your Fibonacci retracement tool. Stretch the tool from potential X-point to A-point. Look at your B-point. Does it touch 50%? If not, then move your potential X-point to a higher structure point (for bull patterns) or lower structure point (for bear patterns). Restretch the Fibonacci retracement tool from this new potential X-point to A-point. Is B-point Ok now? If B-point goes through 50% and touches 61,8% then move your potential X-point to a lower structure point (for bull bats) or to a higher structure point (for bear bats). Restretch the fibs. Is B OK now? Remember: B-point MUST at least touch 50% and never touch 61,8% If there’re no structure points that allow your B-point rest in 50-61,8% range then there won’t be any Bat patterns.
Step #5. If there are more than one structure point allowing B-point rest in 50%-61,8% range, then choose whatever makes XA larger.
Step #6. After you have found a proper X-point placement measure the XA move. How many pips it is? To find out what size of XA move was proven to be optimal see Part I.
