Trade Setup
The X-A leg is generated by an initial price swing in one direction.
The market forms the B if it touches at least a 50% retracement of the XA and it does not touch a 61.8% retracement of the XA.
The market forms the C if it touches at least a 38.2% retracement of the AB and it does not exceed the A.
The Market forms the D (completion point) by fulfilling an 88.6% retracement of the XA.
Conventionally, limit orders are set at the D point with the expectation that price will reverse. If the order is triggered but price does not immediately reverse but rather continues in the direction of the C-D leg, targets should be adjusted accordingly. The Fibonacci retracement tool should be re-stretched from A to the new price extreme, D. Target 1 and Target 2 should be moved to these new levels.
If Target 1 one is hit, conventional rules state that half of the initial position should be closed and the stop loss for the remaining half should be placed at the original entry point (breakeven).
Bat Target 1: 38.2% retracement of the AD leg.
Bat Target 2: 61.8% retracement of the AD leg.
Bat Stops: 113% extension of the XA
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