What does this abbreviation mean? It stands for Back to Back Setup. I was first discovered by me when I was backtesting Gartleys. I have noticed one interesting thing. Sometimes gartleys appear very close to each other. One gartley’s AD may serve as another gartley’s XA. After that second 8 times of 10 I osbserved a huge movement going much further than my secondary targets. I called it DGS – double setup. But then I found the same formation while testing cyphers and bats. I also found that different patterns may be combined. The first is and the second is bat or and vice versa. So I changed the name of the setup and called it BBS.
Studying this phenomenon I came to a conclusion that these formations take place in consolidation periods. The consolidation being bordered by shows channels, flags, triangles and . So these huge movements were classic channels, flags, triangles or breakouts.
On the chart above presented one of these setups. I minimized it so you can see the flag itself. May be you’ll have some problems differentiating bats. In this case just maximize the chart pressing ‘+’ button.
As you can see price went lower than the second Bat’s X to retest the lower border of a flag and then went skyrocket. Make sure that your stops are not just below X but also below the border of a flag, triangle or formation. In these formations borders serve like magnets. So, if your stop is not beyond the border there’s a high probability that it’ll be triggered. On this particular chart 1,113XA, my regular Bat stop placement, was touched. Luckily, I already knew about this setup and placed stops beyond the lower border. To maximize my profits I adjust my targets from C-point retest to A-point retest keeping in mind that A-point is an opposite side of a channel. Although a in the direction of the overall trend has a high probability of success, I prefer to take profits at the border. Classic flag strategies presuppose taking profit measuring the flag’s staff. It’s done the same way as pattern traders look for D point. So you can maximize you profits even further. Trying to catch such big moves you are to protect what you have already earned. So, trailing stops to structure won’t be a bad idea. Test it to find the best way of maximizing profits.
Well, I think it’s all for today. Press like and subscribe if you want me to keep on posting this stuff.
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Hope to see you next Wednesday.
P.S. Pattern traders, look close to this BBS:
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