Just to let you know, what cashDemoN is talking about sounds a lot like Carney’s ‘BAMM Theory’, which Carney introduces in his third book, ‘Harmonic Trading Vol 2’.
It’s a possible play to take a long position on a bearish pattern when price moves past the B point. Of course you don’t know if price will continue to complete the pattern, where you would exit your long position and enter a short position, but you can’t be sure of anything in trading All you can do is take the highest probability trades and minimize your risk.
Carney named his theory ‘BAMM’, which is an acronym for ‘Bat Action Magnet Move’. What Carney noticed was that price seems to be drawn to the PRZ (like a magnet pulling on it) once it passed the B point. Price should head decisively towards the PRZ, and any hesitation or stalling in price action would be a signal to exit the trade.
Carney states, and I quote, ‘Regardless of the pattern, the price action frequently was drawn to the distinct harmonic zone. In my opinion, this technical phenomenon was defined by the relative structure of the overall price action as it entered the final CD leg of the pattern’.
The only examples he gives in his book depict Bat patterns, which he favours over Gartley patterns for this type of trade because the Bat pattern accommodates a wider range between the B point and the PRZ, as opposed to the equivalent but smaller range produced by the Gartley.
Both the Bat and the Gartley have a PRZ within the confines of the pattern, ie they do not exceed the X point, which remains the etreme point of the pattern, and maybe this is why Carney favours the Bat for this trade over the other patterns. I don’t know, he doesn’t elaborate on that issue. The impression I get is that if you are going to take these trades, the best potential lies in a B point that is 0.5 XA or less, with a target of .0886 XA.
I think it’s worth keeping an eye on. Let me know if or what you observe regarding this ‘BAMM Theory’.
I netted around 260ish pips last week
I’m not out to make record breaking trades every trade I make. I learned a long time ago that a profit is a profit, no matter how small it is. I’m well aware that Rome was not built in a day. If you can average 100 pips a week for a year, under the right money management plan you can become a rather wealthy person
Hi. I just started trading about 2 weeks ago on a practice account. I saw a post that you have a chat room where you discuss trading. May I join the chat room because I want to communicate with other traders and get more experience and tips from others.
I’m not up to this book yet, but I’ve heard it mentioned and the idea definitely has merit.
I know of at least one group of people who not only trade the harmonic patterns themselves, but “inside” them like Carney’s theory suggests. As far as I’m aware, they use a combination of simple S/R with trendlines and one indicator for divergence.
For now though, I’m still fine tuning some aspects of the ‘big stuff’ to concern myself with that. Besides, just these setups themselves are enough to make my universe, and are probably enough to keep most traders occupied depending on how many timeframes/pairs are scanned.
The 1.000 CD convergence would of worked well. Next one would be 1.618 (25 pip convergence not so bad on daily chart in my opinion). Next one would be Butterfly … way up there though lol.
Here is a pattern on the AUDCAD Weekly chart that is close to convergence. Taking a look at the monthly chart shows this price has been tested quite a bit over the past ten years lending this price point to be a strong horizontal line of resistance. Let me know what you think
All you can do is take the highest probability trades and minimize your risk.
