Bump and run Patterns Guideline (PDF)
The Bump and Run chart model is a remarkable reversal pattern that will help you identify the end of a trend and the beginning of a new one. It is an advanced chart pattern that helps traders figure out the end of a trend and the start of a new one. Bump and Run strategy trading have a that is considered a very aggressive market system. One of its aims is to capitalize on very fast-moving markets. We are working hard to develop the most comprehensive guide on different chart pattern strategies. In order to understand the psychology of this chart pattern read this article, we will explain it as simply as possible.
Bump and run Patterns Guide
What is bump and run in trading ?
Bump and Run is a two-step market pattern to determine price reversal. Bump and run pattern is a rare chart pattern, and traders use it in shares, indices, and forex trading. The Bump and run pattern was invented by Thomas Bulkowski. He studied the market structure and made a chart pattern using price action. Retail traders widely use it to predict the long-term trend analysis of the market.
The chart below shows an example of bump and run pattern in the forex market.
This chart pattern is further divided into two types. We can recognize either a bullish bump and run pattern or a bearish bump and run pattern. This distinction is based on the direction of a trend reversal.
Bullish Bump And Run Pattern example
Bullish bump and run formation is a bullish reversal pattern in the forex market. The Bump will exhibit a bearish price trend. After the recognition of a trend line breakout, a bullish trend reversal will form. As a result, the Run phase will be in the bullish direction.
Exactly as it is shown on the screenshot below.
Bearish Bump and Run Pattern Example
Bearish bump and run structure is a bearish trend reversal pattern in the FX exchange. Here, the Bump will exhibit a prior bullish trend. When the trendline breakout appears, a bearish trend reversal will form. So, the Run phase will be in the bearish direction.
To understand it more, have a look at the chart below.
How to identify bump and run reversal structures ?
As we mentioned before, the bump and run reversal pattern has two phases. The bump phase and the un phase. So, to identify the overall pattern we should know first how to recognize these two phases.
Bump phase of the chart structure
At the first, there will be a primary trend either a bullish or bearish trend. After that, a bump phase will appear.
It is simply an impulsive wave at the end of the trend.
Before the Bump, there was always a trend either bullish or bearish. After the trend, a sudden bump in the price pattern will appear.
The first step to making it easier for a forex trader is to draw a trend line. This trend is based on the previous trend (higher highs and higher lows).
To see a valid pattern on the chart, there must be almost two or three waves before the bump.
After drawing a trendline on a previous slow trend, you should be on the lookout for an upcoming price increase. During a bump, the price moves in a steeper trend and away from the trend line. Like a fake price move. You can also draw a small trendline on the elevation to confirm a trendline breakout.
The bump wave should be larger than the previous two or three waves.
Run phase of the chart structure
After the bumps are formed, the run is the second stage of the pattern. The price will break above the minor uptrend line and then start the run phase. The market is undergoing a major trend reversal and the price will move in the opposite direction in a push wave. Then it will also break the main trend line and another push wave will also form.
What does the formation tell forex traders?
This formation shows the trader activity behind the candlestick chart. If you read the price, you can understand it.
So, for example, assume that the previous bump formation trend was bullish. The price is forming a bullish wave. This means that buyers are more powerful than sellers. When a bump forms, it indicates that the price has moved to a larger number in a short time interval. Retailers can’t push the market like this. Therefore, the large traders and institutions, cause the bumpy movement.
It shows that large traders have a price level in mind that they want to break out before the trend reverses. The simple rule is that big traders weed out retailers before the trend reverses.
In this case, the bump is a way for big traders to weed out retailers before a big reversal occurs.
How do you trade bump and run patterns?
When trading bump and run pattern, you must first identify the uptrend and then determine the acceleration (jump) of the uptrend. These two components of the trend form the first part of the pattern.
The first step is to identify trending stocks. Then the elevation on the chart should definitely be steeper. Also, traders can consider trading volume. Volume is critical to the effectiveness of bumps and runs patterns. In previous trends, it was usually low. Then, once the bump appears on the chart, it climbs higher. This helps lift the stock up and creates an actual bump on the chart.
Forex traders should also confirm the validity of bumps and run patterns. It does this by checking that the vertical distance between the top of the hump and the leading trend is at least twice the vertical distance between the top of the price action before the hump and the leading trend line.
Real confirmation of a bump and run reversal pattern is accompanied by a breakout of the leading trendline. Once the hump is formed, expect the price to start moving in the direction of the trendline.
The chart above shows an example of trading with bump and run pattern. Although stock price action may hesitate for a while when a trend is reached, a trend breakout occurs when the pattern is valid. If you see a breakout, the pattern is valid and you can continue chasing its potential. You should only start trading after confirming the validity of the pattern and spotting a breakout of the leading trend. You should trade the bearish breakout with a short position if the pattern is bearish. If it’s bullish, trade the bullish breakout with a long position.
Conclusion
The bump and run chart pattern is another high-probability trade system like Belkhayate System that many professional traders like. You have to be very comfortable with trading reversal patterns, especially bump and run reversals, as the market moves very quickly during the development of this major chart pattern.