Harmonic Trading: Volume Two
Scott M. Carney · 2010 · 289 pages
Carney adds three new tools to the harmonic pattern set: the 5-0 pattern, BAMM breakout theory, and RSI BAMM. Every rule is stated to two decimal places, but every worked example is a chart he already knows the ending of.
The one idea
Volume Two is a sequel for readers who already own The Harmonic Trader and Volume One. It assumes you can already identify a Gartley, Bat, Butterfly, or Crab and know what a Potential Reversal Zone (PRZ) is. What it adds is three refinements built on top of that foundation: the 5-0 pattern, BAMM (Bat Action Magnet Move) breakout theory, and RSI BAMM, a hybrid setup that layers Wilder's Relative Strength Index onto harmonic pattern completions.
The 5-0 pattern is a five-point structure (X, A, B, C, D) built around a failed third or fifth Elliott wave. Its defining feature is a tight AB-to-C extension window of 1.618 to 2.24, followed by a 50% retracement of the BC leg and a Reciprocal AB=CD projection to pin down the entry zone. BAMM theory argues that once price breaks past a pattern's B point (most reliably in a Bat, since its B point sits at 50% or less of the XA leg), the move toward the 0.886 completion behaves like a magnet and can be traded as its own shorter segment. RSI BAMM stacks a seven-step RSI divergence sequence, oversold below 30 or overbought above 70, on top of that same completion zone, and uses the RSI reading itself (not the price pattern) to decide whether the final harmonic pattern completes at a 1.13 or a 1.618 extension.
The throughline across all three additions is precision for its own sake. Carney repeatedly narrows a previously loose zone (a retracement, an extension, a retest) down to a specific decimal, then shows a chart where price stopped almost exactly there. The chapters read as a catalog of pattern taxonomy rather than a trading plan: what to call the shape, not how large a position to take or when to walk away.
What it actually teaches
The RSI BAMM is the book's headline addition and the one with an actual numbered sequence in the text.
TEST THE EXTREME
Wait for RSI (14-period, Wilder's default) to make an impulsive test below 30 (bullish setup) or above 70 (bearish setup). Without this initial extreme reading the rest of the sequence does not apply.
BUILD THE COMPLEX STRUCTURE
The indicator needs to form a complex W-type (bullish) or M-type (bearish) reading, either an impulsive structure or a more drawn-out complex one, before the setup can continue.
MARK THE TRIGGER BAR
Identify the specific RSI Trigger Bar, the price bar whose position relative to the prior extreme low or high determines everything that follows.
WATCH RSI AND PRICE DIVERGE
Price should push to a new low (or high) while RSI holds above 30 (or below 70) on the retest. That gap between price and indicator is the divergence the whole method is built on.
SET THE CONFIRMATION EXTENSION: 1.13 OR 1.618
If the Trigger Bar sits 2 to 4 bars off the extreme low, the Confirmation Point completes at a 1.13 extension. If the Trigger Bar is the extreme low itself, the Confirmation Point extends to 1.618 instead. Carney calls this a small-looking gap that gets expensive fast in real trading.
MATCH IT TO A HARMONIC PATTERN
Execution happens where a harmonic pattern completes inside that 1.13-1.618 zone. A Bullish Butterfly (1.27 XA extension) is the most common match at the 1.13 confirmation; a Bullish Bat or Alternate Bat can complete there too. Stops sit beyond the 1.618 extension for a 1.13 setup, or beyond 2.0 for a 1.618 setup.
WAIT FOR THE ACCELERATION TRIGGER
An optional final signal: the RSI structure breaking back above 30 (or below 70) after the Confirmation Point. Carney frames this as a 'do or die' moment, costing a slightly worse entry price in exchange for filtering out Confirmation Points that stall instead of reversing.
What it looks like Monday morning
A reader who already trades harmonic patterns from Volume One walks away with two extra filters to apply before pulling the trigger: check whether the setup is a 5-0 (a failed wave, then a 1.618-2.24 extension, then a 50% BC retracement) instead of a Gartley or Bat, and check RSI at the completion zone for the specific 1.13/1.618 divergence sequence rather than just eyeballing overbought/oversold.
In practice that means adding an RSI plot with a 14-period setting to every chart already being screened for harmonic patterns, and building a habit of marking the Trigger Bar's distance from the prior extreme (2-4 bars versus the extreme bar itself) before deciding which extension target to use. None of this changes position sizing, stop discipline, or how many setups a week are realistic to find; the book is silent on all three.
| Leg | Requirement |
|---|---|
| X-A-B initial impulse | 1.13 to 1.618 extension at the B point |
| A-B to C | 1.618 to 2.24 extension; below 1.618 or above 2.24 invalidates the pattern |
| B-to-C retracement (completion) | 50% retracement of the BC leg defines the PRZ |
| C-D leg | Reciprocal AB=CD, equal in length to the AB leg, projected from C |
Carney states plainly that if the AB-to-C extension does not reach 1.618, or exceeds 2.24, the structure is not a valid 5-0.
The RSI BAMM is a method that examines the state of the indicator before considering the structure of the price action.Scott M. Carney, Harmonic Trading: Volume Two
Where it fails
- Every case study is a call Carney already won. Chapter 1 walks through the 2000-2002 bear market and the 2008 crash almost entirely by quoting Carney's own HarmonicTrader.com market reports calling the S&P 500's 800 bottom and the Dow's 6800-7000 low in advance. There is exactly one acknowledged failure in the whole book (the 'Monster Bullish Gartley That Failed' on the NASDAQ, pages 38-40) against dozens of winning calls. That ratio is not evidence the method works; it is evidence of which examples got selected for a promotional retrospective.
- No backtest, no win rate, no sample size, anywhere. Every pattern in the book, the 5-0, BAMM, RSI BAMM, is illustrated with one or two hand-picked charts. There is no statement anywhere of how often a 5-0 with a valid AB-to-C extension actually reverses versus fails, what the average reward-to-risk looks like, or how many valid setups appear in a typical month on a typical instrument.
- The rules that sound precise are full of 'typically' and 'usually.' The RSI Trigger Bar is 'typically' 2 to 4 bars from the extreme low; the 1.13 versus 1.618 threshold hinges on judging whether a bar 'is' the extreme low or merely close to it. In real time, before the extreme is confirmed, that distinction is a judgment call, not a rule, which leaves plenty of room to decide after the fact that a setup was valid.
- It assumes you already own Volume One. The book states outright that it 'will not cover execution or trade management strategies' for the 5-0 pattern because those are 'the same as for all harmonic patterns' from the first two books. A reader who has not already internalized the Gartley, Bat, Crab, and Butterfly definitions, and the PRZ concept, from earlier Carney material will be lost by chapter 3.
- These patterns have since been automated and commoditized without independent validation. The 5-0, BAMM, and RSI BAMM entered retail charting platforms (as built-in harmonic pattern scanners) in the years after this 2010 printing. Their wider adoption is evidence of popularity, not evidence the underlying edge survived automation or got out-of-sample tested by anyone outside Carney's own firm.
- The teaching method is entirely visual, with no way to systematize it. There is no code, no spreadsheet template, and no screening checklist condensed into one place; the rules are scattered across prose and chart captions. A reader who wants to scan hundreds of tickers for a valid 5-0 setup has to either do it by eye, chart by chart, or trust a third-party tool built to Carney's specification that this book does not audit.
Who it is for
Buy it if
You already trade Carney's harmonic patterns from The Harmonic Trader or Volume One, understand PRZs, and want the specific 5-0/BAMM/RSI BAMM extensions with their exact ratio thresholds spelled out in one place. Discretionary chart readers who like Fibonacci-based pattern recognition and are comfortable making judgment calls about trigger bars will get the most use out of it.
Skip it if
You are new to harmonic trading and don't already know a Gartley from a Bat; start with Volume One instead. Also skip it if you want any statistical case, backtest, or win-rate evidence before adopting a method, since none appears anywhere in this book, and the market case studies are Carney's own winning calls with essentially no losing examples shown.
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