My backtesting, forward testing and real trading pointed to a very interesting phenomenon. I have noticed that when price action violates B-point, it usually goes to 0,886XA to complete the . Of course, C-point should be in its place before price action violates B)). For bats violation means a Higher High and Higher Close above B. For bats – Lower Low and Lower Close below B. This phenomenon was first described by the founder of , Scott Carney. He called it BAMM. It stays for Bat Action Magnet Move. And it really works as it is called – like a magnet. Well, I repeat the idea: when B-point is violated the usually completes.
This gives us an edge, don’t you think? We have a higher probability of one thing happening over another.
How can we trade it? We can trade it as a classical breakout strategy or we can trade it like a 2618. In first strategy we place our limits at B-point after the breakout and wait for a pull back to enter. In 2618’s we stretch fibs from the high/low of double top/bottom to a high/low of a breaking candle and place limits at 0, to enter. I use the second method because I truly believe that market respects fibs)).
So, what my BAMM strategy looks like? First I need to introduce a new point. I will call it “E”. It’s the high/low of a breaking candle. Suppose I am tracing a completion. After C-point completes I wait for a B-point violation. When I have a HHHC-candle I stretch fibs from C-point to this candle’s high (E-point). I place limit orders at 0,618CE and stops at 1,113CE. I use D-point as take profit. I close half of my position at E-point retest and move stops of the other half to breakeven. If price goes higher without triggering the entry, I restretch the fibs from C to a new E and modify my limit. If price hits D before 0,618CE then I delete my orders. I use stop and reverse technique to enter short when pattern completes. It means I sell two units. The first unit closes my long position and the second opens my short. For bats everything is vice versa.
Note I use a combination of BAMM and strategies. Let’s look at some outcomes.
If a completes my BAMM wins and triggers my Bat entry. Trading Bats along I either have my Bat entries win or lose. Combining with BAMM I have a winning BAMM and a winning Bat or a winning BAMM and a losing BAT. Note that BAMM always wins when pattern completes. If BAMM loses then never completes and I delete my Bat entries.
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