Price patterns have always been the preferred tools of traders because of their simplicity and effectiveness. You probably already know the butterfly and the bat pattern, but today I'm going to show you a way to effectively trade these two patterns.

The Butterfly and the Bat Pattern are two of the Harmonic Patterns. Listening to Harmonic sounds noble, noble, complicated, difficult to understand, ... but if you take a little time, you will be more addicted to it than price action. Because after the Harmonic Patterns, the price will go with a very long trend, you can eat the next wave if you catch the Harmonic Pattern correctly.

Of course, these patterns do not always cause the trend to reverse, sometimes it is a bit wrong. But this number is few.

The butterfly pattern (the butterfly for short) and the bat pattern (the bat for short) are trend reversal patterns. When the price forms a pattern that looks like a butterfly, it is called a butterfly, and so does a bat. But it doesn't matter for the butterfly or the bat, as long as the price forms patterns in accordance with the specified Fibonacci ratios of the Harmonic waves are ok.

We have another, more important, more realistic task that is to find the right entry point, not sit there arguing whether this is a butterfly or a bat.

Experience shows that a bat pattern usually appears at the bottom of a downtrend, while a butterfly usually forms on the top of an uptrend. So the bat will look like an M, and the butterfly will look like a W. This information is quite important, take note.

Let me show you an example:

Can you see at the top of the trend that the letter W appears? That is the butterfly pattern.

Add another butterfly, this one is bigger:

Did you see that after the butterfly formed, the downtrend was very strong? Our mission is to eat the trend.

And here is a bat pattern, appearing at the bottom of a downtrend, after a bat, the price rises very nicely:

How to trade butterflies and stalks here?

First of all, you have to ask, how to recognize the butterfly and the bat first. This has an indicator, you can go to the internet search, when added, it will draw you the Harmonic patterns when it detects. If it hasn't, it won't draw.

So the part to find the butterfly is ok.

The second question is how to trade? There are traders who advise us to enter orders as soon as the butterfly is formed.

And the truth is that, when choosing such entry points, the price often goes up and hits the stop loss. We can't trade this way.

As you all know, all patterns have resistance, support, and harmonic patterns like bats and butterflies. Therefore, we will wait for the breakout price to enter an order. This is the mind of this method. As follows:

The example above looks like we have seen the butterfly, but it is still flying high, no need to hurry. You will draw a support line from the two bottoms of the pattern. Of course, the price will drop after the butterfly appears, but we will wait for it to drop to support and breakout.

Then, we will enter a SELL order, placing a stop loss on the top of the breakout candle. Takeprofit doesn't need to be placed, because for Harmonic once the price has gone, it goes very far.

Another example:

In the case of the bat, we will resist from the two peaks of the pattern, wait for the price to breakout, and enter a BUY order.

One more example:

Above is how you can effectively apply Harmonic waves to make a profit. Some little notes for you:
  1. In addition to these two patterns, you can apply this method to other patterns in Harmonic (shark, crab, something, ...)
  2. There will be times when the pattern is wrong, the method is wrong. The reason is simple: no holy grail exists here.
  3. Some of you will wonder: wait until the price breakout resistance/support, it ends its trend. But don't worry. After the Harmonic Patterns, the price will form a new trend, and of course, when it is called a new trend, it is not easy to be weakened by a small resistance/support.
  4. Incorporate strict capital management.