harmonic Bat pattern Reward Risk ratio
By now you should have already read what the harmonic Bat pattern is -> Bat pattern definition, and about the importance of the pattern location and the power that comes with it -> Bat pattern and Elliot Wave theory
Where to Enter, where to Exit and where to place the Stop Loss, these are next Typical questions traders do ask.
Attached next 2 pictures present a logical Entry, Exit, Stop Loss price levels for the Bat pattern and Reward:Risk ratios calculated for them.
Bat pattern is a correction (corrective move), which with high probabilty, would bo followed by an impulse move. The minimum range of this impulse, should be the previous highs (which as presented on the diagram above would be Bat pattern's point A).
Here we go even further: the Bat pattern in the proper location should forecast the start of the strong impulse wave (Wave3 in EWA/Elliott Wave theory). Such a move should be able to easily reach the 161.8% of the initial impulse move (Bat pattern's XA swing). Therefore we place the Take Profit at 161.8% of XA swing measured from point D.
Note that the spread was excluded from the Reward Risk equations.
Last edited by kor4x; 01-04-2013 at 03:51 PM.