Whether you’re new to FX trading or a veteran, the Batman chart pattern is one of the most renowned in the forex trading world. Like most chart patterns, this one should be studied carefully. Its psychology is an important part of identifying quality setups. The Batman pattern is preceded by high trending prices and market movement in the opposite direction. Hence, traders should understand the underlying psychology of the chart pattern. Then, look for its precursors.
Fibonacci levels
This chart pattern reveals an early warning signal. To trade at a certain level, you must wait until the price hits the pink dot. The price could hit this level before or after the dot. To be an apt trader, you must also look for resistance or support at this level. You can use the Fibonacci levels in the Batman chart pattern in forex trading as a second opinion.
To trade using this chart pattern, you must be familiar with Fibonacci retracements and extensions. Essentially, Fibonacci levels are percentages that show where the price may hit support and resistance. The percentages are calculated by dividing the current Price by the next number in the sequence. Using the same method with the Batman chart pattern, you can use Fibonacci levels as your trading signals.
Double tops and bottoms
The Double Tops and Bottoms in the Batman chart pattern is a classic example of a trend reversal. When the price closes above both the left and right ear, the trend is likely to reverse. If the price closes below the head, however, it is a bearish signal. Regardless of how you enter this chart pattern, it is a good idea to monitor price action closely, as this will help you determine when to enter the trade.
The price action is usually volatile, so it is wise to use stop-loss orders and ensure a 1:1.2 risk-reward ratio. The neckline of a double top is a horizontal level that connects the top and bottom of the price range. This level can be used as a limit level and stop loss level. The trend in price may be weak and reverse. A breakout of this level will confirm the formation of a new trend.
Pennant
There are a few factors to consider before entering into a Batman trade. Firstly, the price needs to be approaching a key resistance or support zone, which means that a Batman trade is likely to be successful. Second, the price must have been rejected multiple times before entering this zone. Third, the price should have a bullish bias and be approaching an important resistance or support level. In this case, the price may continue to rise or fall.
Lastly, the height of the mast will determine the size of the breakout move. A pennant may be small in size, but it can signal huge price moves. It is important to pay attention to this chart pattern in your forex trading strategy. In addition, it is also worth noticing if the trend continues to weaken. A weak pennant could signal a bearish breakout. The bullish pennant might move up slightly, but it will then correct back to 38.2% before breaking out again.
Three black crows
While the three black crows in the Batman chart pattern can make a great entry or exit point, it’s not a proven timer. This is because it never has a chance of working out as a timing indicator. In fact, the three black crows pattern is a proven loser, although it does tend to generate positive expectancy. For this reason, it is best to trade after a bounce.
A bullish market tends to move higher, but bears often send prices lower when the trend turns bearish. The Three Black Crows pattern is a warning that a bearish trend is looming. It is best to enter the market with a sell position at the low of the fourth candle and set a stop loss just above the high of the second bearish candle. Traders can expect to earn a profit by taking this position as long as the close price of the first candle remains above the 50-day moving average.