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Head and Shoulders

The "Head and Shoulders": Real success rates.Inverted Head and Shoulders: WATCH volumes when the neckline breaks!! Here is what we can say about the success rate of the inverted head and shoulders pattern in trading: -The inverted head and shoulders pattern is considered one of the most reliable chart patterns to anticipate a bullish reversal. -According to some sources, the success rate of this pattern would be very high, with around 98% of cases resulting in a bullish exit. -More precisely, in 63% of cases, the price would reach the price target calculated from the pattern when the neckline is broken. -A pull-back (return to the neckline after the break) would occur in 45% of cases. -However, it should be noted that these very optimistic figures must be qualified. Other sources indicate more modest success rates, around 60%. -The reliability of the pattern depends on several factors such as respect for proportions, neckline breakout, volumes, etc. A rigorous analysis is necessary. -It is recommended to use this pattern in addition to other indicators and analyses, rather than relying on it blindly. In conclusion, although the inverse head and shoulders pattern is considered a very reliable pattern, its actual success rate is probably closer to 60-70% than the 98% sometimes claimed. It remains a useful tool but must be used with caution and in addition to other analyses. __________________________________________________________________ Head and Shoulders: Here is what we can say about the success rate of the head and shoulders pattern in trading: -The head and shoulders pattern is considered one of the most reliable chart patterns, but its exact success rate is debated among technical analysts. Here are the key takeaways: - Some sources claim very high success rates, up to 93% or 96%. However, these figures are likely exaggerated and do not reflect the reality of trading. - In reality, the success rate is likely more modest. One cited study indicates that the price target is reached in about 60% of cases for a classic head and shoulders pattern. - It is important to note that the head and shoulders pattern is not an infallible pattern. Its presence alone is not enough to guarantee a trend reversal. - The reliability of the pattern depends on several factors such as respect for proportions, the breakout of the neckline, volumes, etc. Rigorous analysis is necessary. - Many experienced traders recommend using this pattern in addition to other indicators and analyses, rather than relying on it blindly. In conclusion, while the head and shoulders pattern is considered a reliable pattern, its actual success rate is probably closer to 60% than the 90%+ sometimes claimed. It remains a useful tool but should be used with caution and in conjunction with other analyses. _____________________________________________________________________________ NB: In comparison, the classic (bearish) head and shoulders pattern would have a slightly lower success rate, with around 60% of cases where the price target is reached.
BITSTAMP:BTCUSDEducation
by Le-Loup-de-Zurich
1
All About the Head & Shoulders Pattern(Beginner-Friendly) Part.2Hello, everyone. Today, I’m excited to share the second part of my educational series on chart patterns. In this post, we’ll be focusing on the 'Head and Shoulders' and 'Inverse Head and Shoulders' patterns. For those who missed the first part, you can catch up here: ↓↓↓ As always, I’ve kept the explanations simple and beginner-friendly. I hope this guide provides you with valuable insights! Here’s today’s outline: ———— ✔️ Outline 1. What is the Head and Shoulders pattern? Definition Key components Characteristics 2. Head and Shoulders Basic features Examples 3. Inverse Head and Shoulders Basic features Examples ———— 1. What is the "Head and Shoulders" pattern? 1) Definition The Head and Shoulders pattern is a well-established reversal formation that appears after an uptrend and signals the potential start of a downtrend. It indicates that buying pressure is weakening and selling pressure is gaining momentum. 2) Key components Left Shoulder: The initial peak, where the price rises and then pulls back. Head : The highest peak, situated between the two shoulders, representing the final bullish push. Right Shoulder: The third peak, which is typically lower than the head but similar to the left shoulder, signaling diminishing buying interest. Neckline: A key support line drawn across the lows of the left and right shoulders. A decisive break below this neckline confirms the reversal and the beginning of a downtrend. 3) Characteristics Reversal signal: The Head and Shoulders pattern marks a transition from an uptrend to a downtrend. Easy identification: The structure is visually distinctive, with three clear peaks. Neckline significance: A break below the neckline serves as a confirmation signal for the downtrend. Volume dynamics: Volume typically rises during the formation of the left shoulder and head, decreases during the right shoulder, and surges again when the neckline is breached. ———— 2. Head and Shoulders (Reversal from uptrend to downtrend) 1) Basic features End of an uptrend: The Head and Shoulders pattern forms at the end of a bullish phase, signaling a weakening in buying strength. Distinct peak heights: The head is always higher than the shoulders, which are generally symmetrical, though the right shoulder may sometimes be slightly lower, enhancing the pattern’s reliability. Neckline as a trigger: The neckline acts as a critical support level. A break below it confirms the pattern and signals the onset of a bearish trend. Volume confirmation: Volume increases during the left shoulder and head formations, weakens during the right shoulder, and spikes when the neckline is broken, confirming a potential sell-off. Price target: After the pattern completes, the expected price drop is typically equal to the distance between the head and the neckline, providing traders with a target. 2-1) Example 1 In this example, we see a fakeout at the right shoulder, followed by a sharp decline. After a brief retest of the neckline, the price broke through and continued its downtrend. 2-2) Example 2 In this chart, a fakeout occurred when the price dropped from the head and formed the neckline, misleading many market participants. After forming the right shoulder, the price successfully declined. There were two retests, which confirmed the reliability of the pattern. ———— 3. Reverse Head and Shoulders (Trend reversal from downtrend to uptrend) 1) Basic features End of a downtrend: The Inverse Head and Shoulders pattern typically forms at the end of a downtrend, signaling a potential reversal to the upside. Formation of lows: Like the standard Head and Shoulders, this pattern consists of three lows—left shoulder, head, and right shoulder—with the head being the lowest point. Neckline significance: The neckline is drawn across the highs of the left and right shoulders. A break above this line confirms the reversal and acts as a strong buy signal. Volume pattern: Volume tends to decrease during the formation of the pattern but surges when the neckline is broken, signaling strong buying momentum. Target setting: After the pattern is confirmed, the expected price rise is often equal to the distance from the head to the neckline, which helps traders set profit targets. 2-1) Example 1 After the Head and Shoulders pattern formed, the price broke above the neckline, successfully reversing the downtrend into an uptrend. A buy strategy would have yielded profits at the breakout point. 2-2) Example 2 In this example, a smaller Reverse Head and Shoulders pattern formed within the head of a larger pattern (see Example 3). After two successful retests, the price reversed into a strong uptrend. 2-3) Example 3 This example showcases the smaller Reverse Head and Shoulders pattern mentioned in Example 2, located within the head. After two successful retests, a buy strategy could have led to profits as the price reversed into an uptrend. ———— ✔️ Conclusion "Charts are the maps of the market." The Head and Shoulders and Reverse Head and Shoulders patterns we’ve covered in this post are key signals that frequently appear in the market. Charts aren’t random—they are visual representations of market psychology and investor behavior. As traders, our role is to interpret these maps, navigate the market, and make informed decisions. Investing is more than just buying and selling. Sometimes the market may move contrary to our expectations, while other times we seize opportunities and achieve success. Each experience is a chance to learn and grow. The more experience you gain, the more paths you’ll recognize on the chart. Success in this market requires persistence, patience, and continuous learning. Understanding and analyzing chart patterns like the ones discussed here is just the beginning. I hope this post has helped you gain a deeper understanding of the market and make more informed decisions. The market is always evolving, but within that evolution lies opportunity. The key is developing the ability to spot those opportunities. With knowledge, experience, and confidence, you’ll find greater success. Stay prepared, and always listen to what the market is telling you.
Education
by Killer_Whales
1
Amateur vs. Professional GapsWhen analyzing gaps on a chart, the key question to ask yourself is this: Did this gap result from amateur traders reacting emotionally, either buying or selling? Or was it the professional traders, who base their decisions on logic rather than emotion? To determine this, there's a crucial concept you need to grasp first... Professional traders buy after a wave of selling and sell after a wave of buying. Amateur traders, on the other hand, do the opposite! They see a stock rising and, driven by fear of missing out, rush to buy – right when the pros are preparing to sell.
NASDAQ:AAPLEducation
by zerocashcool
2
4 entry-strategies with head & shouldersContrary to popular belief, which considers the head and shoulders pattern to be a reversal pattern, this pattern can also be a powerful continuation pattern!!did you know?? 1-reversal role: in this case, when the neck-line of the head and shoulder breaks, sell and buy signals are issued (see the 2 items on the left in the picture) And an BULLISH trend turns into a BEARISH trend or vice versa!! 2-continuation role: In this case, you should draw a line parallel to the neck-line, on the left shoulder. The break of this line is equivalent to buy or sell signal. In this case, we move in the direction of the trend before the formation of the pattern(see the 2 items on the right in the picture) Important points of the head and shoulders pattern: 1- Before the pattern, an BULLISH or BEARISH trend should be seen. Just extend the neck-line to the left, if it passes through the body of the candles, then there is a PRE-trend. 2- Pay attention to the head and shoulder time-frame. You should consider a time-frame where the distance of the left shoulder from the head in this pattern is 15 to 55 candles!! If you want to learn more, support me on this page! Regarding training, I give examples on analytical posts. Be sure to follow.
Education
by Eldorado_Land
Inverted Head and Shoulders: A Comprehensive GuideThe Inverted Head and Shoulders pattern is a popular and reliable reversal pattern that signals a potential shift from a downtrend to an uptrend. Understanding and identifying this pattern can provide traders with profitable trading opportunities. Anatomy of the Inverted Head and Shoulders Pattern. Left Shoulder: The price declines to a trough and subsequently rises. Head: The price falls again, forming a lower trough. Right Shoulder : The price rises once more before declining to a trough similar to the left shoulder. Identifying the Pattern To accurately identify an Inverted Head and Shoulders pattern, look for the following characteristics: Three Troughs: The head should be the lowest point, with the two shoulders on either side. Neckline: Draw a trendline connecting the peaks of the two shoulders. This line acts as a resistance level. Breakout Confirmation The pattern is confirmed once the price breaks above the neckline with increased volume. This breakout indicates a reversal of the previous downtrend and the start of a new uptrend. Trading the Inverted Head and Shoulders Entry Point Enter a long position when the price closes above the neckline. To reduce false breakouts, consider waiting for a retest of the neckline as support. Stop-Loss Place the stop-loss order below the right shoulder to limit potential losses. This level provides a cushion against false breakouts and unexpected market movements. Target Price The target price can be estimated by measuring the distance from the head to the neckline and projecting this distance upward from the breakout point. Example: Example Reference image of chart ONGC on Daily Time Frame shared below Distance from Head to Neckline: 62 points Breakout Point: 280 points Target Price: 342 points Practical Example of ONGC chart The neckline is drawn connecting the two peaks at 280 level. A breakout occurs at 280 level with increased volume and now candle closed bullish at 288 levels with Good intensity of Volumes. Key Points to Remember Volume: Volume should increase during the formation of the pattern, especially at the breakout point. Timeframe: The pattern can form over various timeframes, but it is more reliable over longer periods. Market Context: Always consider the broader market context and other technical indicators to confirm the pattern. Conclusion The Inverted Head and Shoulders pattern is a powerful tool for traders looking to capitalize on trend reversals. By understanding its structure and applying disciplined trading strategies, traders can enhance their ability to identify and profit from these patterns. I am not Sebi registered analyst. My studies are for educational purpose only. Please Consult your financial advisor before trading or investing. I am not responsible for any kinds of your profits and your losses. Most investors treat trading as a hobby because they have a full-time job doing something else. However, If you treat trading like a business, it will pay you like a business. If you treat like a hobby, hobbies don't pay, they cost you...! Hope this post is helpful to community Happy Trading! RK💕 Disclaimer and Risk Warning. The analysis and discussion provided on in.tradingview.com is intended for educational purposes only and should not be relied upon for trading decisions. RK_Charts is not an investment adviser and the information provided here should not be taken as professional investment advice. Before buying or selling any investments, securities, or precious metals, it is recommended that you conduct your own due diligence. RK_Charts does not share in your profits and will not take responsibility for any losses you may incur. So Please Consult your financial advisor before trading or investing.
NSE:ONGCEducation
by RK_Chaarts
2
Cancellation of “Head-and-Shoulders” Pattern. Bears trapThe "Head-and-Shoulders" (H&S) pattern is considered a powerful trend reversal indicator. However, it can also become very costly for new traders. Yesterday, the S&P provided a great example of H&S cancellation. Traders who entered short on the break-out of the shoulders line (and Monday's low) incurred losses after the price returned to the previous day's range and rallied all the way up. Such scenarios happen more often than you might think. To avoid being caught in such traps, it is important to consider two things: 1. Higher Level Context : In this example, the H&S pattern formed on the hourly time frame. But if we zoom out, we'll see that on the weekly chart, the price is in a strong uptrend, currently making new historical highs. This is a very bullish context, with buyers having full control over the price. 2. Price Behavior on the Break-out : Upon confirmation of a reversal pattern, you should expect sellers to jump in and drive the price down as fast as possible. It is "abnormal" to see the price returning to the previous range and gaining acceptance. This is a trigger that something is not right. Some people will add volume analysis on the break-out, but I’m personally not a fan of it, especially for SPY.
AMEX:SPYEducation
by hermes_trisme
How to tell if a Head & Shoulders pattern is voidThere’s been a number of messages today informing me of the lower time frame head and shoulders pattern. Traders are sometimes caught out with falsely identified head and shoulders patterns, and then the market runs in the opposite direction of that expected as the error is realised causing a energetic surge in price action as traders closes short positions. How do you identify valid from void? The last lower time frame (12hr examples used here) head and shoulders pattern printed in March 2022. There was a couple of leading indications this neckline would confirm as resistance at the time of the breakout: 1) RSI confirmed failed support (black circle) 2) Stochastic RSI is crossing down 80. Very bearish. 12hr head and shoulder March 2022 Now lets look above on the current 12hr chart (main chart) 1) RSI resistance is failing, a breakout is evident. 2) Stochastic RSI is crossing up not down! Very bullish. There you have it. While many traders identify the price action of a head and shoulders pattern in isolation it is an expensive error to ignore what the oscillators are doing at the time of the print. In almost all of the ideas published by Without Worries, if you look udder the main chart idea you’ll notice “Oscillators” as one of the selected indicators for use in the study. Now you know why! Ww
INDEX:BTCUSDEducation
by without_worries
21
Head and Shoulders Tutorial on Crude Oil ChartI have decided to start a short series of tutorials covering common instruments used in technical analysis. In today's tutorial, we observe a successfully identified head and shoulders pattern on the 4-hour chart of Crude Oil, resulting in a substantial movement of around 17%. Here's how to find the instrument: navigate to the left sidebar and select 'Patterns,' where you will find 'Head and Shoulders.' Analyzing and trading correctly involve the following steps: 1) Both shoulders must form within a rising or falling trend. In the case of that Oil chart, we observe a rising trend, indicating a potential short position. 2) The size of the head becomes our target for take profit (TP), and upon reaching TP, we close 80% of the position. 3) Ideally, volumes at the right shoulder should decrease, and upon breaking, they should increase. Risk Management Strategy: 1) Limit each trade to no more than 2% of your deposit. 2) Always utilize stop-loss and take-profit orders. 3) Never trade money you are not prepared to lose. 4) Start with small budgets. It is crucial to emphasize that risk management must be adhered to whenever you engage in trading! Register and trade stocks and crypto using my link with a discount on commissions: bingx.com/invite/E6RCUFJT
TVC:USOILEducation
by CarpBuro
Learn Best Price Action Patterns by Accuracy Last year, I shared more than 1300 free signals and forecasts for Gold, Forex, Commodities and Indexes. In my predictions, quite often I relied on classic price action patterns. In this article, I will reveal the win rate of each pattern, the most accurate and the least accurate formations of the last year. Please, note that all the predictions and forecasts that I shared this year are available on TradingView and you can back test any of the setup that I identified this year by your own. Just choose a relevant tag on my TradingView page. Also, some forecasts & signals were based on a combination of multiple patterns. Here is the list of the patterns that I personally trade: 🔘 Double Top or Bottom with Equal Highs The pattern is considered to be valid when the highs or lows of the pattern are equal. The pattern gives a bearish/bullish signal when its neckline is broken. 🔘 Double Top or Bottom with Lower High/Higher Low or Cup & Handle The pattern is considered to be valid when the second top/bottom of the patterns is lower/higher than the first one. The pattern gives a bearish/bullish signal when its neckline is broken. 🔘 Head & Shoulders and Inverted Head and Shoulders The pattern gives a bearish/bullish signal when its neckline is broken. 🔘 Horizontal Range The pattern is the extension of a classic double top/bottom with at least 3 equal highs/lows. The pattern gives a bearish/bullish signal when its neckline is broken. 🔘 Bullish/Bearish Flag The pattern represents a rising/falling parallel channel. It gives a bullish/bearish signal when its upper/lower boundary is broken. 🔘 Rising/Falling Wedge Pattern The pattern represents a contracting rising/falling channel. It gives a bullish/bearish signal when its upper/lower boundary is broken. 🔘 Rising/Falling Expanding Wedge The pattern represents an expanding rising/falling channel. It gives a bullish/bearish signal when its upper/lower boundary is broken. 🔘 Descending/Ascending Triangle The pattern is the extension of a cup & handle pattern with at least 2 lower highs/lows. The pattern gives a bearish/bullish signal when its neckline is broken. Please, also note that all the patterns that I identified and traded were formed on key horizontal or vertical structures. Remember that the accuracy of any pattern drops dramatically if it is formed beyond key levels. I consider the pattern to be a winning one if after a neckline breakout, it managed to reach the closest horizontal or vertical structure, not invalidating the pattern's highs/lows. For example, if the price violated the high of the cup and handle pattern after its neckline breakout, such a pattern is losing one. If it reached the closest structure without violation of the high, it is a winning pattern. 🔍 Double Top or Bottom with Equal Highs I spotted 85 setups featuring these patterns. Their accuracy is 62%. 🥉 Double Top or Bottom with Lower High/Higher Low or Cup & Handle 96 setups were spotted. The performance turned out to be a little bit higher than a classic double top/bottom with 65% of the setups hitting the target. 🔍 Head & Shoulders and Inverted Head and Shoulders 58 formations spotted this year. Average win rate is 64% 🏆 Horizontal Range The most accurate pattern of this year. More than 148 patterns were spotted and 74% among them gave accurate signal. 🔍 Bullish/Bearish Flag 38 setups identified this year. The accuracy of the pattern is 57% Rising/Falling Wedge The pattern turned out to be a little bit more accurate. Among 62 formations, 59% end up being profitable. 👎 Rising/Falling Expanding Wedge The worst pattern of this year. I recognized 24 patterns and their accuracy was just 51%. 🥈 Descending/Ascending Triangle 64 patterns were identified. The win rate of the pattern is 66%. The most important conclusion that we can make analyzing the performance of these patterns is that they all have an accuracy above 50%. If you properly combine these patterns with some other technical or fundamental tools, the accuracy of the setup will increase dramatically. Good luck in your trading! ❤️Please, support my work with like, thank you!❤️
Editors' picks
OANDA:XAUUSDEducation
by VasilyTrader
27
Learn to identify some useful Chart patterns, Merry Christmas🎄 Unlocking the Secrets of Chart Patterns: Navigating Market Trends 📈 Season's Greetings to all our readers! As we celebrate the spirit of the holidays, let's delve into the fascinating world of financial markets. In our journey to understand and navigate the complexities of trading and investing, we've touched upon essential chart patterns that can serve as invaluable guides for market enthusiasts. In the midst of the festive cheer, let's revisit some of these powerful indicators: the Double Bottom, Flag and Pole, Bullish Pennant, Rising Wedge, Falling Wedge, Triple Top, and Inverted Head and Shoulders. Understanding these patterns can be akin to unwrapping gifts of insight into potential market movements. So, grab a cup of cocoa, settle into your favorite chair, and join us as we explore the significance of these chart patterns and share practical tips on incorporating stop-loss strategies to enhance your trading toolkit. Wishing you a Merry Christmas filled with joy, warmth, and prosperous insights in the financial markets! 🎅🎁🚀 Double Bottom: Description: Imagine a smiley face turned upside down. A double bottom is a chart pattern that looks like two rounded troughs (bottoms) next to each other. Interpretation: Indicates a possible reversal of a downtrend. The price has tried to go down twice but failed, suggesting a potential upward movement. Stop-Loss Tip: One can place a stop-loss slightly below the lowest point of the double bottom. If the price falls below this level, it may invalidate the pattern. Flag and Pole: Description: Think of a flag on a flagpole. The "pole" is a strong, quick price movement, and the "flag" is a rectangular-shaped consolidation pattern. Interpretation: The flag and pole pattern often signals a continuation of the previous trend. The flag represents a brief pause before the price resumes its original direction. Stop-Loss Tip: One should set a stop-loss just below the lower end of the flag. If the price drops below this level, it might suggest a reversal of the trend. Bullish Pennant: Description: Similar to the flag and pole but with a small symmetrical triangle (pennant) instead of a rectangle. Interpretation: Indicates a temporary consolidation after a strong upward movement. It suggests that the bullish trend might continue after the brief pause. Stop-Loss Tip: Place a stop-loss under the lower trendline of the pennant. A break below this line could signal a potential trend reversal. Rising Wedge: Description: Picture a triangle with its top side steeper than the bottom side. The price makes higher highs and higher lows but in a narrowing range, with indicator making Lower Highs (Bearish Divergences). Interpretation: This pattern can indicate a potential reversal to the downside. It suggests that the buying interest is weakening, and the price may soon decline. Stop-Loss Tip: Place a stop-loss just above the last price swing high of the wedge. If the price drops below this line, it may suggest a potential reversal. Falling Wedge: Description: Similar to the rising wedge but inverted. The top side is less steep than the bottom side. Interpretation: Represents a potential reversal to the upside. It suggests that selling pressure is weakening, and the price may be ready to move higher. Stop-Loss Tip: Place a stop-loss just below the last price swing low of the wedge. If the price drops below this line, it may suggest a potential reversal. Triple Top: Description: Visualize a horizontal line touching the tops of three consecutive peaks. Interpretation : Indicates a possible reversal of an uptrend. The price has failed to break above a certain level three times, suggesting a potential downturn. Stop-Loss Tip: One should set a stop-loss slightly above the highest point of the triple top. If the price rises above this level, it may negate the pattern. Inverted Head and Shoulders: Description: Picture three troughs, where the middle one (head) is lower than the two on either side (shoulders). Interpretation: This pattern suggests a potential reversal from a downtrend to an uptrend. It signifies a shift in momentum from bearish to bullish. Stop-Loss Tip: One should place a stop-loss just below the neckline (the line connecting the highs of the pattern). If the price falls below this line, it might indicate a failed reversal. I am not Sebi registered analyst. My studies are for educational purpose only. Please Consult your financial advisor before trading or investing. I am not responsible for any kinds of your profits and your losses. Most investors treat trading as a hobby because they have a full-time job doing something else. However, If you treat trading like a business, it will pay you like a business. If you treat like a hobby, hobbies don't pay, they cost you...! Hope this post is helpful to community Thanks RK💕 Disclaimer and Risk Warning. The analysis and discussion provided on in.tradingview.com is intended for educational purposes only and should not be relied upon for trading decisions. RK_Charts is not an investment adviser and the information provided here should not be taken as professional investment advice. Before buying or selling any investments, securities, or precious metals, it is recommended that you conduct your own due diligence. RK_Charts does not share in your profits and will not take responsibility for any losses you may incur. So Please Consult your financial advisor before trading or investing.
NSE:NIFTYEducation
by RK_Chaarts
49
Decoding Market Patterns:10 Essential Price Patterns Every TradeIn the intricate world of trading, price patterns are the footprints left by market sentiment. Understanding these patterns is like deciphering a complex code, revealing insights into potential market movements. Today we will explore 10 essential price patterns every trader should recognize. Each pattern is a chapter in the dynamic story of market behavior, offering opportunities to identify trends, reversals, and strategic entry or exit points. 1. Bull Flag: The Flagbearer of Continuation A Bull Flag is a continuation pattern, often seen in strong uptrends. It resembles a flagpole (the initial price spike) followed by a rectangular flag (consolidation phase). When the price breaks above the upper boundary of the flag, it signals a potential continuation of the uptrend. 2. Bear Flag: The Bearish Counterpart The Bear Flag is the opposite of the Bull Flag. It appears in downtrends, with a flagpole representing the initial price drop followed by a consolidation period. When the price breaches the lower boundary of the flag, it indicates a potential continuation of the downtrend. 3. Head and Shoulders: The Classic Trend Reversal The Head and Shoulders pattern is a powerful reversal indicator. It consists of three peaks – the central peak (head) is higher than the surrounding peaks (shoulders). When the price drops below the neckline (a line drawn through the lowest points of the shoulders), it suggests a potential trend reversal from bullish to bearish. 4. Inverse Head and Shoulders: The Bullish Resurgence The Inverse Head and Shoulders pattern is the bullish counterpart of the Head and Shoulders. It occurs after a downtrend and indicates a potential reversal to an uptrend. The pattern consists of three troughs – the central trough (head) is lower than the surrounding troughs (shoulders). When the price rises above the neckline, it signals a potential shift from bearish to bullish. The cool thing about chat patterns is that they are everywhere. You often see many different chart patterns on a singular chart, or smaller patterns that are a part of a larger pattern. The tricky part is finding them and appropriately identifying them. 5. Double Top: The Bearish Reversal Duo A Double Top pattern occurs after an uptrend and signals a potential reversal. It consists of two peaks at nearly the same price level, indicating a struggle to push the price higher. When the price falls below the trough between the peaks, it suggests a possible shift from bullish to bearish. 6. Double Bottom: The Bullish Reversal Duo The Double Bottom is the bullish counterpart of the Double Top. It occurs after a downtrend and signals a potential reversal to an uptrend. It consists of two troughs at nearly the same price level, indicating a struggle to push the price lower. When the price rises above the peak between the troughs, it suggests a potential shift from bearish to bullish. 7. Rising Wedge: The Rising Price Constrictor A Rising Wedge is a bearish continuation or reversal pattern. It can form during a downtrend or in an uptrend where buying pressure becomes exhausted. The wedge is characterized by converging trend lines that slope upward. While the price may make higher highs and higher lows, the pattern tightens, indicating weakening momentum. When the price breaks below the lower trendline, it suggests a potential continuation of the downtrend or reversal of an uptrend. Rising Wedge Reversal Example: Rising Wedge Continuation Example: 8. Falling Wedge: The Falling Price Constrictor The Falling Wedge is the bullish counterpart of the Rising Wedge. It forms during an uptrend or a downtrend, characterized by converging trend lines that slope downward. While the price may make lower highs and lower lows, the pattern tightens, indicating weakening selling pressure. When the price breaks above the upper trendline, it suggests a potential continuation of the uptrend. Falling Wedge Continuation Example: Falling Wedge Reversal Example: 9. Symmetrical Triangle: The Balance of Bulls and Bears A Symmetrical Triangle is a neutral pattern that forms during a trend, indicating a period of consolidation. It is characterized by converging trend lines that slope in opposite directions. When the price breaks above the upper trendline, it signals a potential bullish move, and when it breaks below the lower trendline, it signals a potential bearish move. 10. Pennant: The Brief Consolidation Pause A Pennant is a continuation pattern that forms after a strong price movement. It resembles a small symmetrical triangle, indicating a brief consolidation before the previous trend resumes. When the price breaks above the upper boundary, it suggests a potential bullish continuation, and when it breaks below the lower boundary, it suggests a potential bearish continuation. Important Thing To Consider: Price patterns are a tool that if practiced and executed properly can be a great asset for any trader. There are a few things that all traders should keep in mind when using price patterns to make trading decisions. Context is critical: Price patterns don't exist in isolation; they occur within the context of larger market trends. It's essential to consider the prevailing market conditions, including the overall trend (bullish, bearish, or sideways), volume trends, and recent price action. Confirmation is Key: While recognizing a price pattern is an important skill, relying solely on its formation might lead to premature or false trades. Traders should always wait for confirmation signals before taking action. Confirmation can come in the form of a price breakout above a pattern's resistance level, a significant increase in trading volume confirming the pattern's direction, or additional technical indicators aligning with the pattern's signal. Waiting for confirmation helps traders filter out false signals, reducing the risk of entering trades based solely on pattern Risk management is paramount: No pattern, regardless of its historical accuracy, guarantees a profitable trade. Traders must always implement proper risk management strategies, including setting stop-loss orders and defining acceptable levels of risk per trade as a percentage of their trading capital. Risk management ensures that even if a trade based on a price pattern fails to materialize as expected, the impact on the trader's overall portfolio remains manageable. Practice, practice, practice: Identifying price patterns is a skill that improves with practice and experience. Traders should dedicate time to studying historical charts, both in live markets and during backtesting. Regularly practicing pattern charting enhances the ability to spot patterns quickly and accurately. TradingView offers a great set of tools to help anyone get started by offering a full line of automated pattern recognition indicators for educational and research use. Utilizing these automated pattern recognition indicators is a great way to visualize patterns in the real world as patterns are often less clean than textbook examples. Recognizing these price patterns equips traders with a valuable skill set for navigating a dynamic market. However, it's vital to remember that patterns, like pieces of a puzzle, offer meaningful insights when combined with other indicators and thorough analysis. No single pattern guarantees profits, and each should be evaluated within the context of the broader market conditions. By integrating pattern recognition into a holistic trading strategy, traders can unlock the door to more informed, confident, and strategic trading decisions. Happy trading! Ben with LeafAlgo
Editors' picks
NASDAQ:NVDAEducation
by LeafAlgo
19
Ultimate Guide For Trading INVERTED HEAD & SHOULDERS PATTERN Hey traders, Inverted head and shoulders pattern is a classic reversal pattern. It signifies the weakness of buyers in a bearish trend and a bullish accumulation. ⭐️The pattern has a very peculiar price action structure: Trading in a bearish trend the price sets a lower low and retraces setting a lower high (left shoulder), then the market goes lower setting a new low but instead of setting a new lower high, the price returns back to the level of a previous lower high setting an equal high (head). After that bears start pushing again but with an amplifying bullish pressure, the market sets a higher low and returns back to equal highs setting a new one (right shoulder). 🔔Equal highs form a horizontal structure called a neckline. Here is a perfect example of a completed inverted head and shoulders patterns, that was formed in a bearish trend on Gold on a 4H time frame. Once the pattern is formed it is still not a trend reversal predictor though. The trigger that is applied to confirm a trend reversal is a bullish breakout of a neckline of the pattern. Above, the breakout of the neckline is the indication of a confirmed bullish reversal. 📈Then a long position can be opened. For conservative trading, a retest entry is suggested. Safest stop is lying at least below the right shoulder. However, in case the heights of the right shoulder and head are almost equal it is highly recommendable to set a stop loss below the head level. 🎯For targets look for the closest strong structure resistances. After a retest of a broken neckline, Gold bounced. Entry was lying on a neckline, stop loss below the right shoulder, target was based on a closes strong resistance. Hey traders, let me know what subject do you want to dive in in the next post?
Education
by VasilyTrader
8
📈 Charting Lesson: What do I even look for in a chart?!Full-time trader here. Sharing some knowledge for free . If this helps you, show some love: follow me for more and like this idea. 👍 Why do I need a chart anyway? First, we need to convince you of why you need a chart. No problem. Let's say you're a fundamental analysis investor. The stock has to make sense. The stock has to last forever. It needs to be a growth stock. Let's say... NASDAQ:AAPL NASDAQ:GOOG NASDAQ:NVDA NASDAQ:TSLA is a good example over the last few years. Now that you found a good candidate, when are you going to buy? At an all-time high? At an all-time low? One share a day? One share a week? No. Buying a stock without looking at the chart is like driving with a blindfold. Don't do it. Pull up a chart. Observe past price action. Try to find a trend. Plan your entry. Do this even if you're going to hold for 20 years. When I pull up a chart, what do I look for? I just see a bunch of lines. Let's first make sure you are looking at the correct view. On the top left corner of your screen, you'll see your user icon. Next to it is the ticker. Next to it is the interval. Next to THAT is the chart type. Make sure you select "CANDLES". Not "hollow candles". Here's how it should look: Mine may look a bit different because I changed my theme. But the candles is what we care about. Now the juicy part. Support and Resistance are Key Reversal Levels. When you open a chart, the first thing you want to do is look for areas where the price has reached in the past and reversed or got rejected or bounced. For example, every time SPY reached 443.37 in the chart above, it reversed. Let's call this a, "key level". If the price is ABOVE that key level, the line is called SUPPORT. If the price is BELOW that key level, the line is called RESISTANCE. Using the horizontal line tool, make sure you have these key support and resistance levels on your chart. Try to ONLY buy near support and sell near resistance. If the stock is choppy, do your best. If you can't, skip it and go to another stock. There's thousands! Stocks, Currencies, and Cryptos Move in Trends. Up or Down. Next, try to find a "trend". A trend is something where if you connect the dots, the price jumps right from that straight line. Pull out your trendline tool and try to connect some dots. Don't go through any candle bodies. Going through wicks is okay. It's actually recommended. Three touches are required to make a valid trendline. If you see only TWO touches? Is the price going TOWARDS the trendline if you were to extend it? There's a good chance it's going to head towards that TL and bounce! Good job. You found a good trade potential. Identify Reversal or Continuation Patterns. Look for known patterns. In the example above, there is a "head and shoulders" pattern. This is a bearish reversal pattern. Know that not all patterns will come true. It's good to know the overall signal the market is giving. If every trader sees it, it's likely not going to happen. In the above example, a looming H/S pattern is scary given already bad economic conditions and recession/ inflation worries. In this case, the market may be trying to tell you something. Understand that these patterns are not just nice-looking drawings on a chart. They work because they display some sort of buyer/ seller psychology. I will post more examples of known patterns on my TradingView profile soon. Be sure to follow if you want to learn more. If you benefitted from this, you are welcome to follow me, comment any questions, or share this with your friends. Good knowledge should be free. I'll post more insight soon. Thank you for reading and for your continued support. 👍
AMEX:SPYEducation
by kingdips
3
How to Head and ShouldersGreetings, Financial Enthusiasts! 🌟 If you appreciate our charts, give us a quick 💜💜 The Head and Shoulders pattern is a well-known chart formation in technical analysis. It indicates a reversal from a bullish to a bearish trend, usually at the end of an upward trend. Key Points: - Head and Shoulders: Chart pattern signaling trend reversal. - Formation: Three peaks on a baseline - two lower outer peaks and a higher middle peak. - Bullish to Bearish: Suggests a shift from an upward trend to a downward one. - Applicability: Seen on all timeframes, suitable for various traders and investors. - Entry Levels: Easily identifiable, aiding in trade implementation. Why It Matters: The Head and Shoulders pattern provides traders with a visual representation of a trend reversal. It's widely used due to its simplicity and applicability across different timeframes. The Pattern: - Formation (Market Tops): 1. Left Shoulder: Price rises, forms a peak, then falls. 2. Head: Price rises again, forming a higher peak. 3. Right Shoulder: Price falls again, then rises but forms a lower peak than the head. - Formation (Market Bottoms): 1. Left Shoulder: Price falls, forms a trough, then rises. 2. Head: Price falls again, forming a lower trough. 3. Right Shoulder: Price rises again, then falls, forming a higher trough than the head. Neckline: - For Market Tops: Connect the low after the left shoulder to the low following the head to create the neckline. - For Market Bottoms: Connect the high after the left shoulder to the high after the head to form the neckline. Trading the Pattern: - Wait for the pattern to complete before trading. - Entry when price breaks below the neckline (tops) or above it (bottoms). - Stops placed above the right shoulder (tops) or below it (bottoms). - Profit targets calculated based on the head-to-shoulder difference and added (bottoms) or subtracted (tops) from the breakout level. Why It Works: - Sellers enter as price falls from its peak, reducing aggressive buying. - The neckline marks a point where traders exit positions, driving price toward the target. - A lower right shoulder (tops) or higher right shoulder (bottoms) signals a trend shift. - Profit target assumes forced exits by those in losing positions. - The neckline prompts many traders to exit, pushing price towards the target. - Volume analysis helps confirm patterns; expanding volume (bottoms) shows increased buying interest. Pitfalls: - Waiting for pattern completion may require patience. - Not all patterns lead to successful trades. - Profit targets aren't always reached. - External events can disrupt patterns. - Patterns can be subjective; traders should define their criteria. The Head and Shoulders pattern, though not foolproof, provides a structured approach to identify and act on trend reversals.
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Education
by Vestinda
21
How to trade head and shoulder pattern? As a forex trader, it's essential to have a robust arsenal of technical analysis tools at your disposal. One of the most powerful and reliable chart patterns you can use is the "Head and Shoulders" pattern. This pattern is prized for its ability to signal potential trend reversals, allowing traders to make informed decisions and capitalize on market opportunities. In this comprehensive guide, we'll delve deep into the Head and Shoulders pattern, breaking down its components, identifying its variations, and learning how to trade it effectively. Understanding the Head and Shoulders Pattern The Head and Shoulders pattern is a classic reversal pattern that forms after an extended uptrend, signaling a potential change in market direction from bullish to bearish. It consists of three peaks, with the middle peak (the "head") being higher than the other two peaks (the "shoulders"). The pattern typically unfolds as follows: 1. The Left Shoulder - The left shoulder represents the first peak after a strong uptrend. - This peak is typically followed by a minor retracement, creating the first trough. 2. The Head - The head forms after a brief rally from the left shoulder's low point. - It represents the highest peak in the pattern and usually exceeds the previous peak. - After reaching this peak, the price retraces again, forming the second trough. 3. The Right Shoulder - The right shoulder is the third and final peak in the pattern. - Like the left shoulder, it is lower than the head and forms after a minor rally. - The right shoulder's high is followed by a retracement, creating the third trough. Key Characteristics of the Head and Shoulders Pattern To effectively identify and trade the Head and Shoulders pattern, it's crucial to understand its key characteristics: 1. Symmetry - The left and right shoulders should be roughly symmetrical in terms of height and width. - The head should be the highest point in the pattern. 2. Volume - Volume plays a vital role in confirming the pattern. - Volume should generally decline as the pattern forms and then increase as the price breaks below the neckline (more on this later). 3. Neckline - The neckline is a trendline drawn horizontally connecting the low points of the left and right troughs (the shoulders). - The neckline serves as a critical level of support. A breach of this level confirms the pattern. Trading the Head and Shoulders Pattern Trading the Head and Shoulders pattern involves two main steps: identification and execution. Identification: 1. potting the Pattern: Begin by identifying a well-defined Head and Shoulders pattern on your forex chart. 2. Volume Confirmation: Ensure that volume decreases as the pattern forms and increases upon breaking the neckline. 3. Neckline: Draw a neckline connecting the lows of the left and right shoulders. Execution: 1. Entry Point: Place a short trade when the price breaks below the neckline. This serves as a signal that the pattern has confirmed. 2. Stop-Loss and Take-Profit: Set a stop-loss order above the right shoulder and a take-profit order based on your risk-reward ratio. 3. Risk Management: Be mindful of risk management, and never risk more than you can afford to lose on a single trade. Variations of the Head and Shoulders Pattern While the classic Head and Shoulders pattern is powerful, variations can offer additional insights: Inverse Head and Shoulders: - An inverse Head and Shoulders pattern signals a potential bullish reversal. - It comprises three troughs with the head being lower than the shoulders. - The pattern is confirmed when the price breaks above the neckline. Complex Head and Shoulders: - Complex variations may have multiple heads or shoulders, making them harder to spot. - Despite their complexity, they follow the same principles of confirmation through neckline breaches. Conclusion The Head and Shoulders pattern is a valuable tool in the forex trader's toolkit. By mastering its identification and execution, you can gain a competitive edge in the market. Remember that no pattern is foolproof, and risk management remains paramount in forex trading. As with any technical analysis tool, it's essential to combine the Head and Shoulders pattern with other indicators and analysis methods for a well-rounded trading strategy. So, start practicing, keep refining your skills, and always stay informed about the latest market developments to become a successful forex trader.
Education
by forexorbit
How To Trade The Head & Shoulders PatternThe Head & Shoulders is an extremely popular and easy to spot chart pattern used in technical analysis. After you read this guide you will know exactly what to look out for whilst trading. The pattern appears on all times frames and can, therefore, be used by day and swing traders as well as investors. Entry levels, stop levels and price targets make this trading formation easy to implement, as the chart pattern provides important and easy-to-see levels. First, let’s look at the formation of the head and shoulders pattern: Formation of the pattern: Left shoulder: Price rise followed by a left price peak, followed by a decline. Head: Price rise again forming a higher peak. Right shoulder: A decline occurs once again, followed by a rise forming the right peak which is lower than the head. As you can see from the image above, it is very similar to the triple top, however the peaks are of different heights and the neckline is not strictly horizontal. A head and shoulders pattern is formed first by a peak (the shoulder) followed by a higher peak (the head) followed by another lower peak (the second shoulder). In this instance, we draw the neckline by connecting the two lowest points that are visible from the pullbacks. More often than not the line will not be straight, but don’t worry this is typical for a head and shoulders pattern. PLACING THE NECKLINE The first step is to locate the left shoulder, head and right shoulder on the chart. In the standard head and shoulders pattern (market top), we connect the low after the left shoulder with the low created after the head. This creates our “neckline” – the blue dashed line on the example. HOW TO TRADE THE HEAD & SHOULDER PATTERN So how do we trade this? Well, we use the exact same method as the triple top and double top. Simply wait for a clean break of the neckline and then enter our SELL positions. We can expect a pullback to be a similar distance to the difference between the head and the neckline. Tip: Some traders say that the signal is more accurate when then neckline is a downslope. This would signify that the market is clearly losing strength and the possibility of a clean break of the neckline is more likely. Chart pattern formations are rarely textbook perfect, meaning there may be some discrepancies between the respective shoulders and head. It is very important that traders wait for the pattern to complete. One should not assume that a pattern will develop or that a partially developed pattern will become complete in the future. Partial or nearly completed patterns should be watched, but no trades should be made until the pattern breaks the neckline. In the head and shoulders pattern, we are waiting for price action to move lower than the neckline after the peak of the right shoulder. For the inverse head and shoulders, we wait for price movement above the neckline after the right shoulder is formed. A trade can be initiated as the pattern completes. Plan the trade beforehand, writing down the entry, stops and profit targets and noting any variables that will change your stop or profit target. The most common entry is when a breakout occurs – the neckline is broken and a trade is taken. Another entry point requires more patience and comes with the possibility that the move may be missed altogether. This method involves waiting for a pullback to the neckline after a breakout has already occurred. This is more conservative in that we can see if the pullback stops and the original breakout direction resumes, but it also means the trade may be missed if the price keeps moving in the breakout direction. PLACING YOUR STOP-LOSE In the traditional market top pattern, the stop-loss is placed just above the right shoulder (topping pattern) after the neckline is penetrated. As a break above this point is usually where the pattern becomes invalidated. Alternatively, the head of the pattern can be used as a stop, but this is likely a much larger risk and reducing the reward to risk to reward ratio of the pattern. WHY THE HEAD & SHOULDER PATTERNS WORKS No pattern is perfect, nor does it work every time. Yet there are several reasons why the chart pattern theoretically works: As price falls from the market high (head), sellers have begun to enter the market and there is less aggressive buying. As the neckline is approached, many people who bought in the final wave higher or bought on the rally in the right shoulder are now proven wrong and facing large losses – it is this large group that will now exit positions, driving the price toward the profit target. The stop above the right shoulder is logical because the trend has shifted downwards – the right shoulder is a lower high than the head – and therefore the right shoulder is unlikely to be broken until an uptrend resumes. The profit target assumes that those who are wrong or purchased the security at a poor time will be forced to exit their positions, thus creating a reversal of similar magnitude to the topping pattern that just occurred. The neckline is the point at which many traders are experiencing pain and will be forced to exit positions, thus pushing the price toward the price target. Volume can be watched as well. During inverse head and shoulder patterns (market bottoms), we would ideally like the volume to expand as a breakout occurs. This shows increased buying interest that will move price toward the target. The decreasing volume shows a lack of interest in the upside move and warrants some scepticism. DISADVANTAGE OF TRADING HEAD & SHOULDER PATTERN As stated, no trading pattern is perfect. Here are some potential problems with trading a Head and Shoulders pattern: You need to find patterns and watch them develop, but you should not trade this strategy until the pattern is completed. So it could mean a long period of waiting. It will not work all the time. During times of high volatility, the stop-loss levels will sometimes be hit. The profit target will not always be reached, so traders may wish to fine-tune how the market variables will affect their exit from the security. The pattern is not always tradable. For example, if there is a massive drop on one of the shoulders due to an unpredictable event, then the calculated price targets will likely not be hit. Patterns can be subjective. One trader may see a shoulder, where another does not. When trading patterns, define what constitutes a pattern for you beforehand – given the general guidelines above. INVERTED HEAD & SHOULDER PATTERN As with most of these patterns, there is always a mirror pattern that works in the exact same way. Here is an example of an inverted head and shoulders pattern. As you would expect, the inverted head and shoulders pattern only arises in a downtrend and must meet all of the same criteria as the standard head and shoulders pattern. We simply place a LONG once there is a clear break of the neckline and the trend reversal is confirmed. CONCLUSION Head and shoulder patterns occur on all times-frames, and can be easily seen visually. While subjective at times, the complete pattern provides entries, stops and profit targets, making it easy to implement a trading strategy. The pattern is composed of a left shoulder, head, then followed by a right shoulder. The most common entry point is a breakout of the neckline, with a stop above (market top) or below (market bottom) the right shoulder. The profit target is the difference of the high and low with the pattern added (market bottom) or subtracted (market top) from the breakout price. The system is not perfect, but it does provide a method of trading the markets based on logical price movements. (Profit-taking opportunities abound using this lesser-known pattern.
BINANCE:ADAUSDEducation
by linofx1
7
📈 4 BULLISH PATTERNS YOU NEED TO KNOW📌How to easily identify these patterns? 🟢Cup and Handle Pattern The cup and handle pattern is a bullish continuation pattern that typically occurs after a significant uptrend. It is characterized by a U-shaped "cup" followed by a smaller consolidation known as the "handle." The cup portion represents a temporary pause or correction in the price, forming a rounded bottom. This signifies that selling pressure has diminished, and buyers are stepping in. After the cup formation, the handle is formed as a slight downward drift in price, usually in the form of a small consolidation or a shallow retracement. The handle represents a final consolidation before the resumption of the bullish move. The handle should be relatively smaller in size and have a downward-sloping price action. 🟢Double Bottom The double bottom pattern is a bullish reversal pattern that signifies a potential trend reversal from bearish to bullish. It consists of two consecutive lows that are approximately at the same level, forming a support level. The first low represents a selling climax or a period of intense selling pressure. After the first low, the price rebounds and retraces to form a temporary high, creating a potential resistance level. However, buyers step in again, pushing the price back up, resulting in a second low that matches or is very close to the level of the first low. This double bottom formation indicates a significant level of support where buying interest outweighs selling pressure. 🟢 Bullish Flag The bullish flag pattern is a continuation pattern that occurs after a strong upward move in price. It is characterized by a brief period of consolidation, where the price forms a narrow and rectangular range, resembling a flagpole and a flag. The flag portion of the pattern is typically slanted in the opposite direction of the initial price move. The flagpole represents the initial strong upward move, indicating a surge in buying interest. Following the flagpole, the price enters a consolidation phase, represented by the flag. This consolidation allows the price to stabilize and absorb selling pressure. The flag pattern should have parallel trendlines that contain the price action. 🟢Inverse Head and Shoulders The inverse head and shoulders pattern is a bullish reversal pattern that indicates a potential shift from a bearish to a bullish trend. It consists of three consecutive lows, with the middle low (the head) being lower than the two outer lows (the shoulders). The pattern resembles a head between two shoulders. The left shoulder forms as the price declines, followed by a subsequent rally to create a temporary high. The price then retraces, forming the head, which is lower than both the left and right shoulders. After the head, the price rallies again to form the right shoulder, which is usually slightly higher than the left shoulder. 👤 @QuantVue 📅 Daily Ideas about market update, psychology & indicators ❤️ If you appreciate our work, please like, comment and follow ❤️
Education
by QuantVue
4
THE KING OF THE HEAD AND SHOULDERS | How to find this pattern ⚡Zer0_Trader The essence of the strategy is to search for the direct and inverted "Head & Shoulders" pattern Shoulders" pattern with the simultaneous confirmation of its potential workout on Zer0 Trader Indicator" indicator, which makes it possible to trade regularly, minimizing the closing of trades by stops. ❌TRADING WITHOUT AN INDICATOR We see the "Head & Shoulders" formation, enter the trade 🔜 the trade is closed by a Stop Loss⛔ ✅Trading with the "Zer0 Trader Indicator" indicator We see the formation "GIP", we see the confirmation of the result on the indicator, we go into trade 🔜 trade is closed at Take Profit As you can see from the examples above, it is absolutely not enough to find only a formation because: - Perfect formations are quite rare in the market, and full-fledged it is necessary to trade regularly to make a full-fledged profit; - Every trader tends to see or "complete" a formation where it is not any trader has a tendency to see or "draw" a formation where it doesn't exist and this leads to an increase in loss-making trades; - without additional confirmation of a potential working out of a formation your deals form, your trades will be closed by stops more often and take unnecessary losses which you could have avoided using the indicator. 📈 INDICATOR "Zer0 Trader Indicator" In order to enter non-obvious but potentially profitable situations and I created the "Zer0 Trader Indicator" indicator to minimize errors. Thanks to which increased the percentage of profitable trades by 90%, and the percentage of trades closed of trades closed by stop was reduced to 10%. The signal to enter the trade, along with the formation of Head & Shoulders/reverse Head & Shoulders, are the reduction of strength on the indicator, namely, descending peaks (divergence/convergence), as in the examples below. 🔎EXAMPLES OF WORKOUTS In the framework of the trading strategy with the use of the indicator all situations can be can be divided into 2 types: - Head & Shoulders/ reverse Head & Shoulders with a flat base - Head & Shoulders/ reverse Head & Shoulders with diagonal base 🟢Head & Shoulders/ reverse Head & Shoulders with flat base *ideal, but rather rare situation 🟢Head & Shoulders/ reverse Head & Shoulders with a diagonal base *The situation you will deal with most often ✍️ STEP BY STEP INSTRUCTIONS FOR WORK Setting up a chart in TradingView - Line" chart view - logarithmic scale Searching for the Head & Shoulders/ reverse Head & Shoulders pattern - it is important that similar patterns draw several coins simultaneously - on a downtrend, the chart and the indicator should be reversed (the scale should be inverted) - you can look for a pattern by the indicator (divergence) - the more ideal-looking is the pattern, the higher is the probability of its execution - it is important that the pattern is drawn correctly not only on the line, but also on a candlestick chart chart Comparison of the chart and the indicator The indicator must show a decrease in strength (three divergence). Searching for the entry point TVX - entry point when the neckline is broken and the of the candle behind it. It's important to have an identical pattern on other coins as well. Risk evaluation Potential of the trade is measured from the top of the head to the level of the neck line. We draw a line from the peak of the head to the the neck line and re-position it to the potential breakout point. We take the "Short/Long Position" tool and put it in the TVX. Then we stretch out the targets by the level of potential, and stop 3-4% above the head (on the candlestick chart). Setting targets Objective 1 (45%) - from the entry point to the middle of the breakout Target 2 (45%) - till the end of analysis Target 3 (10%) - to the moon, based on the previous extremums *At achievement of the first target we move the stop to the Buy ☢️ THE MOST COMMON MISTAKE Entering a trade in the absence of a pronounced divergence on the indicator Such an error leads, at a minimum, to unjustified and useless losses, and, at a maximum, to at most, liquidation, if there were no stops at all! 🔴THE MOST IMPORTANT SECTION WHERE TO START TRADING? You have read this tutorial, you understand everything and you are ready to fix the profit. BUT! The first thing you need to start with is training on history and developing observation of not just the chart, but the chart through the prism of this strategy. For I strongly recommend each of you to do your homework. Despite the fact that I've been trading for several years now, I myself regularly myself on a regular basis. HOW TO DO MY HOMEWORK? 1. You pick any coin and any year that has already completely passed. 2. Rewind the chart to January 1 and press "Market Simulator", which will hide the chart movement from you after that date. 3. Choose a simulation speed of x10 and press the "Forward" button until you see the potential formation of the right shoulder, until you see the potential formation of the right shoulder and head. 4. Next, you draw a potential neck line, a working pattern, and wait for for confirmation of the formation. Additionally, see if a similar situation is drawn on other charts. situation on other charts. 5. The deal worked out. 6. Make 2 screenshots (line + candlestick) and enter the results in the table "Home" in your worksheet. 7. You save the screenshots in the folder with the name of the coin and drop them into the chat room, where I will give comments.
Education
by zer0_trader
2
Head and Shoulder PatternThe head and shoulders pattern is a popular chart pattern used in technical analysis to predict potential reversals in price trends. It is named after its visual resemblance to a head and two shoulders. The pattern is typically formed after an uptrend and is considered a bearish reversal pattern. Here are the key characteristics of a head and shoulders pattern: 1. Formation: The pattern consists of three peaks or highs, with the middle peak (the head) being the highest and the two outer peaks (the shoulders) being slightly lower in height. The lows between the peaks are known as neckline valleys. 2. Neckline: The neckline is a support level that connects the lows between the peaks. It acts as a crucial level to watch for confirmation of the pattern. The neckline can be sloping upward, downward, or horizontally. 3. Volume: Volume is an essential factor in confirming the pattern. Typically, volume is higher during the formation of the left shoulder and the head and lower during the formation of the right shoulder. A significant increase in volume can occur when the price breaks below the neckline, confirming the pattern. 4. Breakout: The pattern is considered complete when the price breaks below the neckline. This breakout is seen as a confirmation of the bearish reversal, indicating a potential trend reversal from an uptrend to a downtrend. 5. Price Target: To estimate the potential downside target, measure the vertical distance from the neckline to the top of the head and subtract that distance from the breakout point. This projected target represents a potential price level that the stock or asset could reach after the pattern is confirmed. The accuracy rate of the head and shoulders pattern, like any other chart pattern, is subjective and varies depending on several factors. It is important to understand that no pattern or indicator guarantees 100% accuracy in predicting future price movements. The accuracy of the head and shoulders pattern can be influenced by various factors, including the timeframe in which it occurs, the market conditions, and the quality of the pattern itself. Some head and shoulder patterns may be more reliable and accurate than others based on these factors. Traders and analysts often use additional confirmation signals and indicators, such as volume analysis, momentum oscillators, and trendlines, to increase the reliability of their predictions when identifying head and shoulders patterns. While the head and shoulders pattern is widely recognized and used by technical analysts, it is important to use it as part of a comprehensive trading strategy, considering other factors such as fundamental analysis, market sentiment, and risk management.
NYSE:AIEducation
by Moshkelgosha
1