Forex head and shoulders trading pattern
of the most reliable chart patterns in Forex. Download the short printable PDF version summarizing the key points of this lesson. As you might image, the name of the formation comes from the visual characteristic of the pattern it appears in the form of two shoulders and a head in between. . And our response is, dont BE greedy! Have a look at the video to see how to tackle the Forex Head and Shoulders chart pattern. Then you should connect these two swing points with a line.
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The Head and Shoulders pattern is a chart figure which has a reversal character. It forms during a bullish trend and has the potential to reverse the uptrend. The short trade should be opened when the price action breaches the blue neck line of the pattern. Determine your price target using the Measured Move rule. When the price reaches the minimum target, it is an opportune time to close out the trade in full, or at least a sizable portion. The third top should be lower than the second top and should be approximately on the same level as the first top. When the price closes a candle above the yellow trend line, the trade should be closed on the assumption that the bearish trend has been interrupted. The price action enters a strong bearish trend after the short Head and Shoulders signal on the chart.
What Im going to do in this article is show you a new way of trading the head and shoulders pattern which is based on understanding whats caused the pattern to form in the market. The head of the pattern is found to be a similar distance away from each of the shoulders whilst the shoulders themselves end up forming at roughly the same prices as one another. Today we will go through one of the more reliable chart patterns within the pattern universe. . What I am referring to is the classic Head and Shoulders Pattern. I shorted the GBP/USD on the breakout through the Neck Line. A second attempt is made to push prices higher resulting in a second higher high. The Head and Shoulders Pattern basically hints towards exhaustion and the final market moves before a new opposite trend starts.