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  1. #1
    freeforex20 is offline Junior Member
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    Default Bump and Run Reversal

    Bump and Run Reversal
    The pattern was originally named the Bump and Run Formation, or BARF. Bulkowski decided that Wall Street was not ready for such an acronym and changed the name to Bump and Run Reversal. Bulkowski identified three main phases to the pattern: lead-in, bump, and run. We will examine these phases and also look at Forex Signals volume and pattern validation.

    1. Lead-in Phase: The first part of the pattern is a lead-in phase that can last 1 month or longer and forms the basis from which to draw the trend line. During this phase, prices advance in an orderly manner and there is no excess speculation. The trend line should be moderately steep. If it is too steep, then the ensuing bump is unlikely to be significant enough. If the trend line is not steep enough, then the subsequent trend line break will occur too late. Bulkowski advises that an angle of 30 to 45 degrees is preferable. The size of the angle will depend on the scaling (semi-log or arithmetic) and the size of the chart. It is probably easier to judge the soundness of the trend line with a visual assessment.

    2. Bump Phase: The bump forms with a sharp advance, and prices move further away from the lead-in trend line. Ideally, the angle of the trend line from the bump's advance should be about 50% greater than the angle of the trend line extending up from the lead-in phase. Roughly speaking, this would call for an angle between 45 and 60 degrees. If it is not possible to measure the angles, then a visual assessment will suffice.

    3. Bump Validity: It is important that the bump represent a speculative advance that cannot be sustained for a long time. Bulkowski developed what he calls an “arbitrary” measuring technique to validate the level of speculation in the bump. The distance from the highest high of the bump to the lead-in trend line should be at least twice the distance from the highest high in the lead-in phase to the lead-in trend line. These distances can be measured by drawing a vertical line from the highest highs to the lead-in trend line. An example is provided in the chart below.

    4. Bump Rollover: After speculation dies down, prices begin to peak and a top forms. Sometimes, a small double top or a series of descending peaks forms instead. Prices begin to decline towards the lead-in trend line, and the right side of the bump forms.

    5. Volume: As the stock advances during the lead-in phase, volume is usually average and sometimes low. When the speculative advance begins to form the left side of the bump, volume expands as the advance accelerates.

    6. Run Phase: The run phase begins when the pattern breaks support from the lead-in trend line. Prices will sometimes hesitate or bounce off the trend line before breaking through. Once the break occurs, the run phase takes over, and the decline continues.

    7. Support Turns Resistance: After the trend line is broken, there is sometimes a retracement that tests the newfound resistance level. Potential support-turned-resistance levels can also be identified from the reaction lows within the bump.

    The Bump and Run Reversal pattern can be applied to Forex Signals daily, weekly or monthly charts. As stated above, the pattern is designed to identify speculative advances that are unsustainable for a long period. Because prices rise very fast to form the left side of the bump, the subsequent decline can be just as ferocious.

  2. #2
    Angel candy is offline Senior Member
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    Default

    It was great to see such information related post so that we can get to know new points which are still unaware by many traders of the market.

  3. #3
    FTS
    FTS is offline Junior Member
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    Default

    Thank you for such detailed description of the pattern! To my mind, it could be very useful for the traders being able to adopt it in their trading.
    At the same time, it is important to understand that the pattern described above has been spotted at the equities market, which is a bit different from Forex. In this particular case, the most important differences are:
    1. Market participant. Stock`s rally takes place when numerous private investors rush into the stock competing in opening the positions. This growing interest makes the price move higher because they absorb the supply and have to move higher to find more shares to buy. Opposite to this, Forex market controlled by large institutional players and all price movements are caused solely by huge financial companies executing their orders. That is why it is less likely that investment bank or hedge fund would conduct emotional trades impacting the price. So, the price dynamic would be different.
    2. Volume. The situations as described in the post above are quite common in the stocks with tiny supply (often called "low float stocks" because of low shares float). This means that supply is very weak, so the relatively large amount of buyers could easily move the price. In such cases the stock could even make 50% or 100% per cent a day. Such movement is absolutely impossible in Forex due to the huge supply, while all substantial movement often caused not by imbalance in supply or demand, but due to the fundamental reasons.

    That is why the idea itself is very interesting, but traders should be very cautious using it on other markets.

  4. #4
    Dinh is offline Junior Member
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    I think the thread creator mentioned that this system applies mostly to stock and equity traders

  5. #5
    Angel candy is offline Senior Member
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    That may be the good idea that he shared details with others so that if one is not good with Forex , he can try stock for trading also.

  6. #6
    clifinvestor is offline Junior Member
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    Default

    It is an interesting strategy. I am wondering if you have applied the setups and seen some meaningful results. It would be nice to see some positive trade screenshots.

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