Head and Shoulders – Gives a very profitable signal about the market reversal.
Thanks to this number you can open a position at the beginning of a new trend.
How does it look?
The appearance of the Head and Shoulders figure consists of five stages:
2. Left shoulder;
4. Right shoulder;
5. Neck line.
First, we need to find an uptrend where the left shoulder will form.
After that, the price makes the last rise, forming a head, after which the fall begins.
The right shoulder appears in a downward movement and the neck line can be drawn after the formation of the right shoulder.
How to negotiate?
The entry point is the break of the neckline.
It is at this moment that the signal in the figure is confirmed.
Some traders are in a hurry and open positions at the top of the right shoulder, which is very dangerous.
Always wait for confirmation of the figure.
Don’t worry if you missed the first entry point, there is always an opportunity to open a position after retesting the neckline.
What about setting a stop loss?
The stop loss is usually placed above the right shoulder.
If the price rose above the right shoulder, then the figure did not work and it is time to get out of the deal.
Where will the profit target be?
To calculate possible targets, the following method is used.
It is necessary to measure the distance from the neckline to the maximum of the head, the resulting value is imposed below the penetration of the neckline, after the right shoulder, this will be your goal.
The head and shoulders pattern can bring you a lot of profit if you trade correctly.
It is worth noting that there is an inverted head and shoulders figure, and this figure indicates a reversal and the imminent start of an uptrend.
The trading rules are the same as Head and Shoulder trading, but just in a different direction.
Operate using not only their shoulders, but also his head!
Traders, if you liked this idea or if you have your own opinion about it, write in the comments. I’ll be happy