Get started

Harmonicsignals

Bat Harmonic Pattern - Advanced AnalysisIn this series of chart patterns, we have taken a look at the more traditional ones. However, we have not yet discussed harmonic patterns. Harmonic patterns form a part of the numerous chart patterns available for the identification of reversal points. The practice of trading using harmonic patterns is often defined as "Harmonic Trading". We felt like it was an appropriate time to discuss the popular bat harmonic pattern, defined as "The most accurate pattern in the entire harmonic trading arsenal" by Scott M. Carney (1). "Suspicions in thoughts are like bats among birds." - Translated from Francis Bacon. 1. Introduction Unlike most traditional chart patterns, these patterns do not require breakouts of the price to be traded and involve the usage of precise Fibonacci ratios (highlighted below) for the identification of harmonic patterns. This makes harmonic patterns less subjective and pretty spooky. Wow. 1.1 Fibonacci Ratios Fibonacci ratios are key components of harmonic patterns. Fibonacci ratios are obtained from the Fibonacci sequence, whose n th element is obtained by adding the two previous numbers of the sequence, that is: Fib(n) = Fib(n-1) + Fib(n-2) The sequence is as follows: 1, 1, 2, 3, 5, 8, 13, 21, 34, 55, 89, 144, 233..., and exhibits various characteristics. One characteristic of interest is given by the ratios between elements in the sequence. The ratio of one element in the sequence with the following one approximately equals 0.618, while the ratio of one element in the sequence with the previous one approximately equals 1.618. These two values are often defined as golden ratios, with 1.618 being denoted as "Phi" (upper-case P) and 0.618 as "phi" (lower-case p). The ratio between elements separated by two positions returns 0.382 and 2.618 respectively, calculating the ratio using a higher separation would return the series of Fibonacci ratios. These ratios are also given by raising the golden number with specific exponents. 0.618^4 = 0.146 0.618^3 = 0.236 0.618^2 = 0.382 0.618^0.5 = 0.786 0.618^0.25 = 0.886 0.618^0 = 1 The rationale behind the usage of Fibonacci ratios with harmonic patterns (and other methodologies in general) is given by the presence of the Fibonacci Sequence in nature and certain organisms and structures, but more importantly in human behavior. If security prices reflect investor behaviors, it seems logical to find a connection with Fibonacci numbers. This is a common rationale used by technical analysts to justify the usage of Fibonacci ratios. A few studies aimed to explain a potential connection between the Fibonacci sequence and financial markets and evidence obtained by Bhattacharya & Kumar provide further incisive research on this connection (2). 2. Harmonic Bat Patterns The bat harmonic pattern is built from 4 segments connecting points X, A, B, C, and D, each one located at a local maxima/minima of the price. The relative distance between the segments is used to determine the validity of a bat pattern; these rules are defined as follows: 1 - Segment AB retraces within 38.2% and 50% of the XA segment (some less strict conditions only require a retracement within 38.2% and 61.8%). 2 - Segment BC retraces within 38.2% and 88.6% of the AB segment. 3 - Segment CD retraces within 161.8% and 261.8% of the segment BC. 4 - Segment AD is approximately equal to 88.6% of segment XA. For the pattern to be valid, the vertex given by point C must be confirmed. It is also interesting to note that the bat pattern can possess an internal AB = CD pattern. A reversal is more likely to occur within the "potential reversal zone" (PRZ). Traders can have different methods for identification however Fibonacci retracements are commonly used, with an extremity of the PRZ located at 88.6% of the internal retracement of XA and another at 161.8% of BC. Another method identifies the PRZ within 78.6% and 100% of the internal retracement of XA. Some traders wait for additional confirmation before entering a position such as the occurrence of internal reversal patterns, oscillator divergences, or for the price to evolve outside the PRZ such that it implies that a reversal is occurring. 3. Stop Loss & Take Profits Various techniques exist to set take profits and stop-loss levels during the formation of a bat pattern. Some traders place the stop loss at or a few ticks below X, which can lead to reduced risk but a higher risk of a premature trigger of the stop-loss. The usage of a very tight stop loss is mentioned by Scott M. Carney. A take profit can be set at point A. Additional Fibonacci retracements might be used for partial exits. 4.Practical Examples Bearish Bat pattern on USDJPY15, we apply Fibonacci retracements to the segment XA and use the levels 0.5, 0.382, 0.236 as partial take profits while level 0 exits the entirety of a position. Bullish Bat pattern under completion on ERGOUSDT 4h, the price breaks the level situated at point B is a good sign for a potential of reach of the PRZ. 5. Observations Oscillator divergences occurring when the price is within the PRZ can be an additional confirmation of a potential reversal occurring. We found no studies proving data that the bat harmonic pattern is superior to other harmonic patterns. One study by Krzysztof Bednarz highlights the profitability of the bat pattern in a trading period of 27 days (3). Bulkowski shares statistics on how often price turns at point D (4). For Bullish Bats, the price reverses at point D 91% of the time, for Bearish Bat patterns the price reverses at point D 86% of the time. Super spooky... References (1) Carney, S. M. (2010). Harmonic Trading, Volume Two: Advanced Strategies for Profiting from the Natural Order of the Financial Markets. Pearson Education. (2) Bhattacharya, S., & Kumar, K. (2006). A computational exploration of the efficacy of Fibonacci Sequences in technical analysis and trading. Annals of Economics and Finance, 7(1), 185. (3) Bednarz, K. (2013). Taking investment decisions on the futures contracts market with the application of Bat harmonic pattern – the increased efficiency of investment. (4) Bulkowski, T. N. (2021). Encyclopedia of chart patterns. John Wiley & Sons.
Editors' picks
BITSTAMP:BTCUSDEducation
by LuxAlgo
43
PETRONET LNGA Bullish Harmonic AB=CD reversal was met by a slanting trend-line resistance which lead to a dip towards 88% retracement with the likelihood of a double bottom activating a Bullish Harmonic Shark. This up move can go till 225/235/255 as long as it does not break the lower base formed when the AB=CD was made. Harmonic Patterns are based on Fibonacci ratios which conform to specific alignments. They are among the fastest to give reversal signals unlike oscillator based systems.
NSE:PETRONETLong
by Dinesh_C_Nagpal
1
ETHBTC long Cyber patternETHBTC possible long on PTZ for Cypher harmonic pattern. Cypher pattern often appears as complex correction of Elliott wave fractal. Also in typical running flat or typical 3th wave correction. If this is case, we should see 1st impulse (not necessary to catch bottom) and better to wait for pullback after first move. If not hold we can see level what I will watch on weekly. REMEMBER all this charts is education only based on harmonic patterns , Elliot waves and Fibonacci.
Long
by CryptoArch_
$SUNW Target PTs 16.50-17.50 and higher...in Parallel Channels: Sunworks, Inc., through its subsidiaries, provides photovoltaic based power systems for the agricultural, commercial, industrial, public works, and residential markets in California, Massachusetts, Nevada, Oregon, New Jersey, and Hawaii. The company also designs, finances, integrates, installs, and manages systems ranging in size from 2 kilowatt for residential loads to multi megawatt systems for larger projects. In addition, it offers a range of installation services, including design, system engineering, procurement, permitting, construction, grid connection, warranty, system monitoring, and maintenance services to its solar energy customers. The company was formerly known as Solar3D, Inc. and changed its name to Sunworks, Inc. in March 2016. Sunworks, Inc. was incorporated in 2002 and is headquartered in Roseville, California.
SLong
by UnknownUnicorn19246015
$AABB PT .54 and higher...LAS VEGAS, April 08, 2021 (GLOBE NEWSWIRE) -- Asia Broadband Inc. (OTC: AABB) ("AABB" or the "Company") is pleased to announce that the Company is finalizing the appointments of new management personnel this month. As AABB moves forward with the development and expansion of mining operations, AABBG gold-backed cryptocurrency and administration initiatives, the Company requires added expertise and professional supervision to achieve its goals. Concurrently with the upcoming management appointments announcement, AABB will be publishing a new website with comprehensive information highlighting all aspects of the Company. Furthermore, subsequent to establishing the new management transition, the Company plans to release an audit status update. About Asia Broadband Asia Broadband Inc. (OTC: AABB) is a resource company focused on the production, supply and sale of precious and base metals, primarily to Asian markets. The Company utilizes its specific geographic expertise, experience and extensive industry contacts to facilitate its innovative distribution process from the production and supply of precious and base metals in Mexico to client sales networks in Asia. This vertical integration approach to sales transactions is the unique strength of AABB that differentiates the Company and creates distinctive value for shareholders. The Company has recently released its freshly minted mine-to-token gold-backed cryptocurrency AABB Gold token (AABBG) and strives to become a world-wide standard of exchange that is secured and trusted with gold backing, an outstanding quality relative to other cryptocurrencies.
OTC:AABBLong
by UnknownUnicorn19246015